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US Satellite Radio Companies See Good Prospects for Growth - 2004-02-01

Satellite radio is on the air throughout the United States. Two companies, XM and Sirius are competing for customers willing to pay for a wide choice of music and information channels beamed down from orbiting satellites, 40,000 kilometers above earth.

Sirius is based in New York City, XM in Washington, DC. Sirius, says spokesman Ron Rodriguez, is the smaller of the two. "After being on the air a little bit less than a year and a half, we have 261,000 customers, as of the close of 2003," he said.

But Sirius and its supporters see a spurt of growth ahead, according to Mr. Rodriguez. "Analysts who seem to know this business pretty well have said that we should get to about 850,000 customers by the end of this year, and we're pretty comfortable with that projection," he said.

XM is clearly the "big dog" in this fight. "Today we have more than 1.36 million customers and we're on pace to have more than 2.8 million by the end of 2004," said Chance Patterson, an executive with XM.

Revenue has been rising for both companies, but both have yet to make a profit. Still, for XM's Chance Patterson, the prospects are good. "We demonstrated that people will pay for radio and that has set the stage very well for us to reach cash flow break-even in the first half of 2005. That is our goal," he said.

Sirius Satellite Radio's Ron Rodriguez also sees a bright future for his company. "We expect that we are going to be reaching cash flow break-even somewhere in 2005," he said.

But, given XM's big edge in customers, we wondered whether XM and Sirius can both be successful. Mr. Patterson says, "Is the market big enough for two players? It probably is. There are, you know, tens of millions of vehicles on the road today. And so the possibility exists that Sirius will do fine."

Sirius has plans to offer satellite video within the next year and a half. XM does not believe video will be commercially viable anytime soon.

And both have plans to expand their universe by providing radio programming in Canada and, possibly, Mexico. But, at the moment, neither expects to go global in the near future.