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XM Satellite Radio _A_

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					      XM Satellite Radio (A)                               Case (HBR - 9-504-009)

XM is a radically new way to listen to the radio. In early 1998, Robert Acker, director of
strategic planning for XM, needs to develop the marketing strategy for the new radio
service. At the center of XM's challenges is to decide which of two business models to
pursue. In particular, management needs to decide whether emphasis should be placed on
charging end-customers a high monthly subscription fee or whether to rely more on sale
of airtime to advertisers. In addressing this dilemma, management needs to consider the
value XM radio creates for different consumer segments as compared with existing
modes of radio (AM, FM) and in relation to its sole competitor in satellite radio (Sirius).
There is also a need to explore how best to leverage manufacturing and channel partners.

Questions

   1. What is the value proposition of XM to different consumer segments? Who
      should be the primary target market for XM?

   2. What aspects need to be considered in pricing the radio receiver and the
      subscription fee? What is the optimal price for monthly subscription? Assume a
      five-year lifetime for a customer. How would your answer change if the lifetime
      were longer or shorter?

   3. How should the price of the service change over time? Should the price be high
      initially and then decrease over time? Should the price be low initially and then
      increase overtime?

   4. What aspects need to be considered in allowing advertising to run in XM's
      service? How does the fact that the firm could also earn money on advertising
      affect the optimal subscription price?

   5. What are the implications of the expected launch plans for XM's rival Sirius?

				
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