Sirius XM has established a deep economic mote in its industry. Sirius Satellite Radio and XM Satellite Radio were the two largest satellite radio providers in the U.S., but these competitors were both losing. In 2008, they merged to become Sirius XM and are now the only satellite radio provider in the U.S. Due to high startup costs for a satellite company, Sirius XM does not have any competition. In 2014 Sirius XM had 27 million subscribers or about 13.5 % of the total market with annual sales approaching 4 billion. Sirius XM's signal spreads throughout the entire country and it has brand recognition countrywide. Contrary to free charge, ad driven radio such as Pandora, Spotify, and iHeartRadio, Sirius XM is a subscription-based model, which generates revenue via customer payments at a fixed cost. Sirius XM differentiates themselves by offering a variety of options and an abundance of stations for all listeners. They have select radio stations, artist specific stations, and talk shows that can only be heard on Sirius XM making it different from its low barrier to entry “free music” competitor market. For example, the Howard Stern show is exclusive to Sirius XM. They offer a unique commercial free listening experience that can be heard from your car, computer, tablet, or smartphone. Customers can listen via satellite or via the Internet. The company offers services not only for automobiles, but also for planes, boats, and businesses. The company has managed to partner with many car manufacturers featuring their services. Almost 70% of new vehicles today come with a trial period of Sirius XM radio. More than half of those result in paid subscriptions. Around 57 million cars have Sirius receivers in the dashboard and they expect to hit 100 million by 2017 assuming the auto industry continues to recover. In addition, the use car market has grown and they are expecting to have by 2017, 2.6 million used car subscribers. About 40% to 50% of audio listening happens in the car. This makes audio entertainment companies fully integrated into the dashboard (like Sirius XM) a very valuable feature. A feature that the competitors like Pandora, Spotify, and iHeartRadio haven’t been able to provide. Although connected cars can also be used with smartphones to stream apps and music through car consoles, this new technology requires internet connection which can be very expensive and have data limits vs. the fixed cost of Sirius XM ($14.50 a month). The company further increased its presence in the industry, by acquiring Agero, a connected vehicle service company, allowing Sirius XM to offer both satellite and wireless services. They also partnered with AT&T to offer emergency and roadside assistance for Nissan Motors. By being able to spread its fixed cost of their 13 orbiting satellites, marketing/advertising and music copyrights/content acquisition among their subscriber base, Sirius XM is able to provide a less costly product making them more profitable with each additional new customer. They have been able to push cost down and increase profit. When compared to other markets cost which have increased due to hypercompetitive environment, Sirius XM programming cost has decreased. Before they merged their programming cost was $450 million for all their offered products except for music and is currently around $300 million. Sirius XM continues to create a significant economies of scale which continues to make it inefficient for a competitor to enter the market. Sirius XM has created a natural monopoly.

References:

Eule, Alexander. "Sirius XM Has a Monopoly on Satellite Radio, a Growing Subscriber Base, and Loads of Free Cash." Bamboo Innovator. 24 Nov. 2013. Web. 28 June 2015. .

Peoples, Glenn. "Business Matters: How Good Is SiriusXM's Business Model? It's Raising Its Price Again." Billboard. 24 Oct. 2013. Web. 26 June 2015. .

"Sirius XM Holdings & The Subscription Media Business." Punch Card Investing. 10 Apr. 2015. Web. 26 June 2015. .