Wednesday, September 26, 2001

XM Satellite Radio makes debut as ‘signal of the future’
By Nedra Pickler
Associated Press

WASHINGTON — Satellite radio went on the air Tuesday, promising listeners greater variety on the dial — for a price.

Hugh Panero, president of XM Satellite Radio, flipped a switch in the company’s Washington headquarters shortly after 12:30 p.m. EDT and began offering service in San Diego and Dallas. The company plans to expand nationwide in the coming months, and a competitor, New York-based Sirius Satellite Radio plans to come on line later this year.

“It’s the signal of the future,” Panero said while tuning into his company’s reggae channel to hear Bob Marley sing “One Love.” He described the concept as “part rocket science, part rock ‘n’ roll.”

XM Satellite Radio is offering 100 channels of different music and talk, with limited advertising on some and no commercials on more than 30 channels. The company has 1.5 million songs in a digital library to aim at markets ranging from opera to Latin romance. Service costs $9.99 a month.

Besides the reggae channel, called The Joint, XM offers a hard rock station called Bone Yard and disco on Chrome. Teens can discuss their problems on Babble On, while adults can tune into comedy, sports or news from a dozen sources, including The Associated Press.

Each of the 100 stations has its own hosts, who broadcast from XM’s headquarters. Among them is Lou Brutus, whose Special X features every type of music imaginable, up to and including people playing the spoons.

“The word has gone out through the bizarre music community and they are coming out of the woodwork,” he said. “This is not some college rock station with 50 listeners. This is going to a nationwide audience.”

XM and Sirius are betting listeners are so dissatisfied with the repetitive commercial format of mainstream radio stations that they will pay for digital music and talk they want.

The companies have ambitious goals of signing up more than 4 million subscribers each in the next four years to break even. Sirius will charge $12.95 monthly and offer more commercial-free programming.

“There are only two companies here and there are a lot of cars and trucks on the road,” Sirius spokeswoman Mindy Kramer said. “We think it’s going to be reminiscent of what happened when your neighbor down the street got cable and all of the sudden your eight or 10 channels weren’t good enough because there is so much more out there.”

Programming is broadcast to satellites and then to radio receivers. The signal can get blocked by tall buildings, so ground transmitters will repeat the signal in urban areas. Some receivers can be used in both autos and in homes.

Mobile phone companies have opposed the ground transmitters because they think they could interfere with cell phone service. But last week, the Federal Communications Commission gave XM and Sirius temporary permission to use the transmitters until it develops rules for their use.

Some analysts were doubtful the companies could get people to pay for radio. They have become even more skeptical since the Sept. 11 terrorist attacks drove down the markets.

XM originally planned to launch its service on Sept. 12, but pushed back the start because of the terrorist attacks.

Morgan Stanley Dean Witter analyst Vijay Jayant said success depends on how committed automakers are to installing the satellite-receiving radios in their vehicles.

General Motors Corp., which has invested $120 million in XM, plans to offer the radios as a factory-installed option in some 2002 Cadillacs and in 20 models next year. The subscription can be included in the car’s financing.

Ford Motor Co. and DaimlerChrysler Corp. have partnered with Sirius and plan to offer the radios in 2003. Other automakers, including BMW and Porsche, are planning to install the radios at the factory.

Meanwhile, subscribers will have to retrofit their cars with $300 radios that can decode the satellite signal. Both companies will advertise heavily with top-name celebrities, although XM is removing scenes from one commercial that show various items falling from the sky in New York.