SiriusXM Presentation

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Some social considerations in the industry are the changing consumer listening habits and the rapid increase in Internet as a content delivery medium. When it comes to technology, the industry relies heavily on the satellites used to broadcast. In addition, with such a strong link to the auto industry, it is important to consider the increase in ride-sharing.

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After our PESTEL, we conducted a Five Force Analysis. Although rivalry from competing firms is strong in most industries, we said that SiriusXM faces low rivalry. After the merger in 2008, they essentially became a monopoly provider of satellite radio service in the United States. But, we concluded that the threat of substitutes was the strongest force in the industry. Instead of listening to Sirius XM, you could tune into the AM/FM radio, use a portable media player, or use platforms such as Pandora or Spotify to listen to music.

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In order to understand the external environment and competitive forces in the industry, we started with a PESTEL analysis to get a clearer picture. Some political factors that we found playing a role in the industry were the broadcast licensing provided by the FCC as well as some copyright issues.

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In terms of economic factors, we found that the industry is vulnerable to economic stability. Fortunately, the auto sales have been booming for the past several years, because satellite radio industry relies heavily on the auto industry. And the unemployment rate has fallen below 5%, which has caused an increase in the number of Americans driving to and from work every day.

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Next, we said that the threat of new entrants is a weak force for various reasons: 1) there are extremely high costs to enter the market; it costs hundreds of millions of dollars for companies to enter the market b/c of the high cost of technology- for example, each of the nine satellites that Sirius owns is worth roughly $300 million. Content is also expensive, licensing is extremely difficult to gain from the FCC, and some of the software is proprietary.

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So before we could start evaluating their current strategies, we took a look at Sirius XM's strengths, weaknesses, opportunities, and threats. We found their biggest strengths to be their exclusive content with top talent such as Howard Stern and sports partnerships with MLB and NFL. We also saw their strong relationships with automakers as a significant strength. In addition, we saw their market position, strong brand name, growing consumer base, superior customer service, and diversification of programming as important strengths. Most importantly, we felt their exclusive content provided them with a competitive advantage.

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Some of their weaknesses are their reliance on the US market, their lack of advertising post-merger, their dependance on automakers, as well as the costly legal and regulatory issues they often face, and the fact that they are subject to unpredictable changes in consumer preferences.

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Some opportunities that we saw for SiriusXM include the steady growth in the industry, the potential to expand outside of North America, and the positive outlook for digital and online services. On the other hand, some threats are the increase in ride-sharing, intense rivalry from Internet-based competitors, and the increase in royalty rates on a yearly basis. Now I'm going to let Dan tell you a little more about the specifics of their current strategies.

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We decided that the buyers in this industry have moderate bargaining power. There are low switching costs so the buyers can unsubscribe at any time and have a wide variety of other options available. Similarly, the bargaining power of suppliers is a moderate force because the music industry provides content as is dominated by a small number of firms. Top talent also provides leverage but is very pricey. In 2008, SiriusXM spent $446.6 million on programming and content alone. I'm gonna pass it on to Brian to tell you a little more about what we found to be the driving forces in the industry.

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We determined that there was no environmental impact in this industry, but legally the Communications Act of 1934 gives the FCC the power of regulation. In addition, export license are required from the government to export some equipment and the royalty rates are decided upon by the Copyright Royalty Board.