Shay Merritté • Corporate Innovation Assignment • February 2, 2010 Bus M&L 855 Innovation Practice • The Ohio State University • Prof. Michael Bills

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The only way to get your music & talk anywhere in the North America**except for MP3 Players, Internet Connected Smart Phones, Slacker Internet Radio, Pandora, HD Radio

(home) (automobile) (on the go)

Shay Merritté • Corporate Innovation Assignment • February 2, 2010 Bus M&L 855 Innovation Practice • The Ohio State University • Prof. Michael Bills

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Sirius XM Basic Business StrategySirius XM is a merger of two satellite radio services (Sirius & XM) that provides satellite radio

services in the US and Canada with 117 channels of specialized and niche music, sports, news, talk, entertainment, traffic and weather. Sirius XM’s satellite radio services can only be heard through

special satellite radio receivers, which Sirius XM designs and sells directly to consumers and through retail outlets. Sirius XM’s business model is the same as other “old style media outlets”

with the main sources of revenue coming from monthly paid subscriptions.

WINTER

Shay Merritté • Corporate Innovation Assignment • February 2, 2010 Bus M&L 855 Innovation Practice • The Ohio State University • Prof. Michael Bills

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Sirius XM By The Numbers

Headquarters

CEO Mel KarmazinPay: $28,207,200CEO since 2004

Billion inRevenue

Shay Merritté • Corporate Innovation Assignment • February 2, 2010 Bus M&L 855 Innovation Practice • The Ohio State University • Prof. Michael Bills

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Sirius XM’s Current State and Need for InnovationEven though Sirius XM has a monopoly on the satellite radio market they are

facing some problems:

2001: $30

Sirius XM Stock Price Changes

2009: $.60

600,000 Customers cancelled their subscriptions in 2009, equal to 3.15% of current subscribers.

19,000,000Total Sirius XM customers left at the end of 2009.

Many Sirius customers develop •from customers of cars pre-installed with internet radio, but with dwindling auto sales, fewer cars with satellite radio is being sold.

Sirius had loses for the last 8 •quarters and was in danger of filling for bankruptcy if not for a $530 Million investment from Liberty Media.

Sirius has had to raise prices on •several services by $2 a month to stay solvent, further alienating potential and current customers during the recession.

There is also increased competition from the increasing

prevalence of MP3 Players, Internet Connected Smart

Phones, Slacker Internet Radio, Pandora and HD Radio.

Shay Merritté • Corporate Innovation Assignment • February 2, 2010 Bus M&L 855 Innovation Practice • The Ohio State University • Prof. Michael Bills

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How Sirius Could Innovate: Services

PROBLEM: Initially Sirius XM initially was able to attract customers through the innovation of providing premium uncensored radio anywhere in North America. They leveraged this through creating exclusive radio contracts with major celebrities and companies including Martha Stewart, Eminem, Howard Stern, The Grateful Dead, NASCAR, MLB, NHL, NFL, just to name a few. However, maintaining the contracts for many of these celebrity and corporate stations are very expensive, Sirius XM must pay Howard Stern $100,00,000 a year for his 2 channels for example. Outside of these very specialized celebrity channels, there isn’t much innovation. Sirius XM needs to innovate and diversify in its normal talk, news and music stations to remain a draw if one of the celebrities quits or Sirius can no longer afford them. One Sirius customer, Blake stated on a satellite radio message board, “For me, if Opie and Anthony and Ron and Fez are let go, for any reason I’m gone.” If Sirius is maintaining customers solely based on one or two shows it is not a good sign.

INNOVATION SOLUTION: Institute the SAY, DO, MAKE consumer research method to create stations that current Sirius XM subscribers want to listen to, and that would hopefully draw new subscribers.

SAY: Sirius would perform traditional quantitative research on what people are listening to on Sirius radio, what songs are being downloaded on iTunes, what music videos and performances are being watched on YouTube, and what consumer surveys say they are listening to.

DO: Sirius could then perform observational research by recording what people are listening to as they drive back and forth to work, what they listen to in the gym and at home, what songs they sing along to, what music is being played at the bars/clubs they go to, etc.

MAKE: Sirius could finally immerse themselves with the consumer by having people journal about what songs they listened to that day, they could have them make playlists (or mixtapes) for songs they want to hear when they are feeling different moods as an example.

Shay Merritté • Corporate Innovation Assignment • February 2, 2010 Bus M&L 855 Innovation Practice • The Ohio State University • Prof. Michael Bills

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How Sirius Could Innovate: Product Design

PROBLEM: Many consumers have complained of the design of many of Sirius XM satellite receivers and products as not being user friendly or aesthetically pleasing. Product and interaction design with their receivers is an area where Sirius XM can innovate to bring in new consumers, maintain current consumers as well as create new brand value. Sirius XM receivers have a multitude of usability issues especially since the merger of Sirius and XM creating 2 sets of stations that must be decoded in different ways. Furthermore, the physical design of the receivers don’t speak to either the premium product that satellite radio is nor does it speak to the intimate use of the product: either when an individual is in the privacy of their car, home, or headphones at the gym or office.

INNOVATION SOLUTION: Follow the 4 Phase Design Process to create a satellite radio receiver that creates:

Social Value: Satellite radio is a premium product, its receiver should be designed to promote itself as a status symbol.

Affective Value: Satellite radio is an emotionally provocative product, the receivers should emotionally reflect this design.

While trying to capture these two emotional values, the design of the new receiver should focus on:

Kinesthetic Design: Satellite radio receivers are currently not user friendly products, the designers of the next generation need to focus on Human factors and focus on how the consumer interacts with the product to make all the functionality completely easy and accessible.

Visual Design: Satellite radio is such a unique and interesting service, that the product with which you interact with it should emphasize the unique spirit of service, as well as be visually stunning to show that this is a completely unique and different media service.

Shay Merritté • Corporate Innovation Assignment • February 2, 2010 Bus M&L 855 Innovation Practice • The Ohio State University • Prof. Michael Bills

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Summary

When Sirius XM launched in 2001, it was a premium service with a first mover advantage of on demand music and talk anywhere in the country along with targeted specific weather and traffic. However, in the following years, as cell phone data and wi-fi networks expanded and devices to access these networks became more advanced but also cheaper, Sirius XM and satellite radio has become an also-ran in the current crowded mobile media marketplace. In order to survive, Sirius XM must innovate not only in the services that it provides, but also in the products that it offers to utilize its services.

Shay Merritté • Corporate Innovation Assignment • February 2, 2010 Bus M&L 855 Innovation Practice • The Ohio State University • Prof. Michael Bills

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Sources

"Analysis: Satellite Radio Subscriber Projections 2007 - 2020." OrbitCast. Bridge Ratings, 27 Jan. 2007. Web. 25 Jan. 2010.Kharif, Olga. "Sirius XM Battles for Subscribers." BusinessWeek 6 Aug. 2009. Print.Kharif, Olga. "Sirius XM's Subscriber Drain." BusinessWeek 7 May 2009. Print.Lowry, Tom. "Sirius XM: More Cash, Fewer Customers." BusinessWeek 7 May 2009. Print."Sirius XM Radio Inc." Wall Street Journal Online. 28 Jan. 2010. Web. 28 Jan. 2010. <http://online.wsj.com>."Sirius XM Radio posts subscriber growth for 4Q." Associated Press 20 Jan. 2010. Print.www.google.com/financewww.finance.yahoo.com