Now it's AM/FM/XM - Broadcasting & Cable

Now it's AM/FM/XM

Satellite radio service, with a $100 million ad campaign, set to debut in September
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After 10 years in gestation, satellite radio will finally make its debut. Washington-based XM Satellite Radio will begin beaming 100 CD-quality audio channels directly to car stereos outfitted with the XM receivers in Dallas; Fort Worth, Texas; and San Diego in September, with a national rollout to be complete by mid-November.

In the race to market, XM beat Sirius, a similar company with similar service. Sirius expects to launch its service late this year.

XM, which has a $100 million advertising budget, is offering 71 diverse music channels (30 of them commercial-free), along with 29 news, talk, sports and entertainment channels from such organizations as CNN and CNBC. Subscribers will pay $9.99 a month, after they purchase an AM/FM/XM radio (which will sell for $249 and up) or upgrade a regular AM/FM car unit.

"It is fitting that we make this announcement near the 20th anniversary of the launch of MTV—which, using video, changed forever the music experience," said Hugh Panero, president and CEO, XM. "XM, using satellite and state-of-the-art technology, will change the music experience once again."

Publicly traded XM has so far spent $1.1 billion of the $1.4 billion it raised to put two satellites in orbit, assemble the programming, develop the receivers and bring the service to market. Major investors include Clear Channel Communications, the nation's largest owner of radio stations (8.5%); DirecTV (6.6%); and General Motors (5.2%).

"In terms of our ability to get sales, the analysts have projected us as having year-end sales of somewhere between 25,000 and 75,000 subscribers," Panero continued. "I think we will probably be in the higher range of that."

According to a company representative, XM hopes to break even by 2004.

General Motors has agreed to offer XM receivers as a factory-installed option in Cadillacs this fall, with more models to have the feature in 2002. XM has similar deals with Saab, Suzuki and Isuzu.

XM plans to spend $45 million of its $100 million ad budget in the fourth quarter of 2001. Spots feature B.B. King, David Bowie and Snoop Dogg.

Having already raised well over $1 billion itself, Sirius plans 85 channels with a slightly more expensive subscription fee of $12.95. It has receiver partnerships with Ford, BMW and DaimlerChrysler.

"I see the two companies splitting the market," said Bear Stearns analyst Robert Peck.

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