The Future of Satellite Radio

As more in-vehicle audio and entertainment options become available to consumers, the question of satellite radio’s relevance has become more prominent. Most vehicle sold today have satellite radio at least as an option, if not standard, and most new car buyers are given a trial subscription, usually anywhere from one to six months. This gives customers that might not have previously considered satellite radio a chance to test the service.

According to the J.D. Power and Associates Multimedia Quality and Satisfaction Study, ownership of satellite radio has increased from 39% of new-vehicle buyers in 2007 to 66% in 2010 (these figures are self-reported by the owners). In addition, 57% want satellite radio in their next new vehicle compared to 49% in 2007. However, it is important to note that this study is based on consumers who have only owned their vehicle for three months, so a large number of these consumers may still be in the free period of their trial subscriptions.

New car buyers with satellite radio in their vehicles are more satisfied with their vehicle’s sound system than owners that do not have this feature; in fact it is the audio/entertainment/navigation feature with the highest impact on overall sound system satisfaction.

However, satellite radio is also the multimedia-related feature with lowest loyalty rate, as 25% of owners who have this feature on their vehicle do not want it on their next vehicle. This could be due to owners that lack previous experience with the feature not using it as much as they think they will, or the fact that they will have to pay for the subscription once the free trial runs out. In comparison, every other multimedia feature in the study has at least 81% of consumers that currently have it in their vehicle also wanting it in their next vehicle, with the highest being Steering wheel controls for audio system at 95%.

Satellite radio users enjoy the programming options, lack of commercials, and signal strength, yet cost is the one factor that prohibits many from continuing their trial subscriptions. According to J.D. Power and Associates 2010 U.S. Automotive Emerging Technologies Study, four out of five current satellite radio owners who are still in the free period cite interest in having this feature in a future vehicle.  However, when the market price of $12.95 per month is presented, this interest decreases by 38 percent.

The satellite radio market is facing much competition in the in-vehicle entertainment market between CD players, MP3 players, and HD radio, in addition to traditional AM/FM radio, which still holds the largest percentage of the radio market. Consumers are inundated with a large number of options for listening to music in their vehicles. Smartphone users can also hook up their devices to an auxiliary input and listen to music through internet applications such as Pandora, which offers free, personalized programming options similar to satellite radio

J.D. Power Perspective

With the recent downturn, there was some question about whether Sirius XM, and by extension, satellite radio, would survive. The company appears to have rebounded, as they have recently surpassed the 20 million subscriber mark, and signed Howard Stern to a new 5-year contract. However, competition from technologies providing similar services without a subscription fee will be a real threat. However, as technologies such as HD radio and streaming radio online from a smartphone are a long way from being universally adopted by the general population, satellite radio as an in-vehicle entertainment option is going anywhere anytime in the near future.

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