The Revolution of Satellite Radio

Satellite Radio

Satellite radio systems are just like the ordinary radios, but instead of receiving it's signal from the ground based transmitters, it receives a HD-quality signals from space to special radios receivers, most of which are installed and used in cars. Customers can also listen to these systems at home.

Satellite radio offers 100 channels of commercial-free music, news, sports, and entertainment. All channels broadcast directly to your vehicle, anywhere in the continental United States. This is a revolution that will change the way we listen to radio. Current research indicates that millions of Americans are dissatisfied with conventional radio. Considering that nearly half of the conventional radio stations broadcast in one of only three formats country music, contemporary music and news - it is understandable. Even assuming one finds a station they like, they must endure up to 18 minutes of commercials each hour. The listener must also be prepared for additional interruptions - a common one is that most radio signals begin to fade at a distance of 30 miles(about 50 km) from their source.

Broadcast, Satellite, and the Car

The satellite radio system Consists of three parts - broadcast, satellite, and the car(as the receiver). National broadcast studios and transmission facilities encompass production facilities capable of broadcasting 100 radio stations. These include extensive music libraries that are continually updated with the latest new recordings, and more obscure selections that are no longer available commercially. Line-of-sight (the ability to "see" the satellite) is required in order for an antenna to receive a satellite transmission. Companies either maximize this line of sight by placing their satellites in orbits directly above the United States, or positioning satellites in geostationary orbits over the equator. By placing satellites above the U.S. the customers receive improved signal strength and coast-to-coast coverage.

Content is also fed to a number of transmitters located in major urban areas. These transmitters, called ground repeaters, supplement the satellite coverage in dense urban areas where tall buildings might block the satellite signal. After the satellites and ground repeaters send their signals, the vehicle's radio picks them up and converts them to music, talk, and data. The car receiver is made up of two parts: the antenna module, and the receiver module. The antenna module is an active system with several elements that "look" along the horizon for the terrestrial signal, and higher for the satellite signal. This module picks up available signals simultaneously, amplifies them, filters out the noise and interference, and passes them on to the receiver module. The chipset inside the receiver module down-converts the signals from 2.3 GHz to a lower intermediate frequency, and then to the digital base band. The signals are converted from analog to digital as part of the down-conversion process.

Within the digital realm, available signals are inspected for quality and combined in an optimal way to use the best information from each source. Instead of merely using the best signal, manufacturers use the best input from all the signals. The combined digital signal is then processed for a number of things. First, it is digitally filtered. The forward error correction is reversed and the music is decrypted. The stereo digital audio is converted back to analog for delivery through the speakers.

The Players

Two broadcasters Sirius Satellite Radio (based in New York) and XM Satellite Radio (based in Washington, D.C.) offer nationwide coverage. They are aggressively marketing satellite radio to consumers desiring more than the limited programming currently available. Consumers will have access to more than 100 channels of eclectic digital sounds, from hip-hop to jazz and opera, for$9.99 (for XM) or $12.95 (for Sirius) a month. The car systems are available on many new models for about $300, and are expected to proliferate to other cars, as car makers are eager for a stake in this new, fast-growing business.

General Motors funded XM (they invested $100 million in 1999) and Daimler Chrysler is backing Sirius. Other car manufacturers are picking up on these two technologies,which are not compatible. For home and portable systems, one can buy mobile, palm-size receivers from Sirius and XM at retailers such as Best Buy, Circuit City, and Wal-Mart for about$200. Both Sirius and XM say advertising will make up a small portion of their revenue, a strategy that could backfire. Demand for satellite radio reached 1.5 million subscribers by end of 2003 (1.2million for XM and 300,000 for Sirius). Analysts believe that satellite radio will reach 3 million subscribers by 2004. Both companies continue to see low revenues, high losses, and continuing debt burden. That is bad news considering that Sirius and XM each spent $80 million for FCC licenses in1997. They have since spent a combined $3 billion building satellites and developing programs, and have been forced to yield equity to auto manufacturers in order to get their radios into cars.

The enormous cost of building a system that relies on satellites, repeaters, and a vast programming network might knock these companies right out of the radio orbit. Analysts predict that satellite radio needs to reach 7.5 million subscribers and about $1 billion in revenues to cover the cost of capital and interest. To reach this target, these companies are getting some help from the auto manufacturers.General Motors is offering XM in 44 of their 57 car lines, up from 25 in 2002. Sirius, which had a five-year head start on XM, has already launched satellites and hit the market with radios available in Ford and Daimler Chrysler's 2003 models. Toyota and Honda are also signing on and customers can buy XM radio for their homes through major retailers.

Based on some of the early success of XM and convinced that its potential was enormous, GM led a group of investors in a $450 million refinancing for XM on Dec 23, 2002. GM deferred $250 million in payments that XM owed it for loans, bonds, and revenue sharing plans until 2006. A group that included Haywood, Barry, Honda Motor Company and the Hearst Corporation put in $200 million in new cash. In return, XM agreed to develop data services, such as weather and traffic, for Honda cars. XM, meanwhile, made several smart moves that allowed it to pull away from rival Sirius. Five years ago, XM decided to develop its radio chipset in-house while Sirius had outsourced its design to Agere Systems. Sirius' chips were delayed and this gave XM a year's head start in the market. For this technology to be successful, both vendors must focus on increasing their subscriber base.

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