Case | HBS Case Collection | July 2003 (Revised March 2004)

XM Satellite Radio (A)

by David B. Godes and Elie Ofek

Abstract

XM Satellite Radio is a radically new way to listen to radio. Management must develop a marketing strategy to launch the firm and the category. A crucial aspect of the strategy is to determine which of two business models the company will pursue. Should it focus predominantly on charging customers a monthly subscription fee or on selling advertising time to advertisers? This decision is closely related to target market selection and to the choice of optimal price points for subscription fees and radio receivers. Market research commissioned by XM provides rich insights into these issues. In addition, XM management needs to figure out how to establish partnerships with the leading electronics manufacturers. A consideration of its market share and channel presence are essential to XM's ultimate success in integrating satellite radio into home and car audio systems. As it formulates its plan, XM needs to take into account the competitive landscape, primarily comprised of broadcast radio (AM and FM) that has been in existence for many years and is offered for free, as well as a second satellite radio provider (Sirius). Includes color exhibits.

Keywords: Advertising; Business Model; Decision Choices and Conditions; Cost Management; Marketing Channels; Marketing Strategy; Problems and Challenges; Partners and Partnerships; Sales; Competitive Strategy; Communications Industry;

Citation:

Godes, David B., and Elie Ofek. "XM Satellite Radio (A)." Harvard Business School Case 504-009, July 2003. (Revised March 2004.)