With the introduction of the Sirius XM application for the Apple iPhone, Sirius XM has positioned themselves into a large secondary market for their programming. As the former adversaries merge into one media behemoth, they have made it clear that they will eventually have different tiers of service for their satellite customers. With this new appication, Sirius has a huge opportunity to push the internet subscriber model in a way that has yet to be seen: Ala Carte.
Currently, a subscriber signs up for Sirius or XM and then needs to add another $3/month fee on top of the original subscription in order to get premium internet radio. Premium internet radio is a prerequisite for the iPhone application. $16/month may be a steep price for some people to accept paying for something they have always thought of as free. New consumers may be somewhat slow to pay $16/month to get radio on their phone. It may be a superior radio experience, but it is still a new bill. Sirius XM can break this mindset with Ala Carte.
iPhone users have been giving the trial a chance and downloading the application at a high rate. With a subscription, you end up getting about 120 channels of music, talk (celebrity, sports, political, men/women, gay, financial, religious, medical), news (global and national), concerts, comedy, celebrity music channels, and more. There is truly something for everyone. Stern fans were left out in the cold at the application launch, but this will be cleared up, I'm sure. What do I do if I only want a handful of channels on the internet stream and I do not have a subscription?
Apple's new iPhone 3.0 operating system allows for in-application subscriptions. If you tie an individual subscription with each of 120 channels, you can offer a monthly subscription on different package levels. Care would need to be taken not to cannibalize your existing subscriptions, but with 30 million+ iPhones and iTouchs sold, there is a huge untapped market. If the offerings are smaller and less costly, it is easier to sell consumers on smaller packages. Get them in the door and upsell them on the channels. To add this feature to the Sirius XM application would only require an application upgrade. No new hardware. No new radio to install.
iTunes users are used to buying one song for $1. Think of all the entertainment that one dollar can now get. You could get subscriptions like this:
$0.00/month Free showcase channels (with advertising)
$1.00/month per standard station
$2.00/month per premium station (Stern, Oprah, O&A)
$3.00/month pick 20 standard channels
$3.00/month politics and business talk
$5.00/month sports package (MLB, NFL, NCAA, NASCAR)
$5.00/month pick 40 standard channels
$10.00/month All Sirius XM standard channels + sports
$13.00/month All channels (standard and premium)
By allowing users to get the channels they want at lower price points, you make the product easier to accept for younger users or those on a budget. If you give users the ability to subscribe for only one month or on a recurring basis, it becomes easier to sample one channel for a month without a significant cost to the consumer.
