Satellite radio is great. It is a quality of life improvement each and everyone of you should be taking advantage of. Unfortunately it looks like Sirius XM’s financial difficulties are continuing and their time may be numbered. In this post I am going to discuss some of the mistakes I feel they made and offer some advice that may apply to your own business.

• Underestimating consumer apathy. Until you have worked on the marketing and sales side of a product campaign you do not realize just how passive our population has become. As a society our natural reaction to advertising has been to shut off our reactions and at least attempt to ignore incoming messages. A more evolved filtration system would be much more effective than apathy, but apathy is what we have developed. Satellite radio offers one of those “I don’t know how I lived without this” experiences which can make for difficult business planning. It brings to mind similar products like the Magic Bullet and Sleep Number Bed. These two companies have managed to be successful where Sirius XM has failed, how come?
• Since the venture capital of the dot com era dried up many amazing companies have been started on 5% of the budget they would have had 2-3 years prior. Often these companies end up being far more financially successful because they are structured to be profitable as soon as possible. Sirius XM is an example of the complete opposite. Starting off with significant capital they signed celebrities like Howard Stern & Oprah to huge contracts in an attempt to attract listeners who would eventually generate the cashflow they needed. Unfortunately, due to point #1, this never happened. Sirius XM has a subscriber base of 18.5 million with, I imagine, an average user fee of $10 per month. That is revenues of $185 million a month. You would think these guys could be turning a profit for that. Unfortunately the debt servicing on money borrowed to support massive contracts, such as the 500 million dollar contract with Stern, chews up these revenues and more. The company should have focused on creating a gradual revenue stream through subscribers to high quality music and news stations first, then used this revenue to purchase celebrity talent once there was a secure user base and profitable business model in place.
• Knowing your market is extremely important. For instance, I am someone who loves music of almost all genres but does not purchase or download a lot of music. I’m also not cool enough to know who is the next best group. Satellite radio is perfect for me, because it allows me to enjoy numerous genres and up and coming bands without anyspecific knowledge or research.

To conclude, be aware of your audience and never underestimate the work required to build a following from them. Whenever possible utilize the strategies of the boot strapper (even if you have the capital) to generate revenue early and build a loyal, referring following. Oh, and don’t sign a contract with one individual work more than 2 years gross revenue.

I work with entrepreneurs to provide them with the confidence, focus and strategies needed to successfully build their first business.

Take Action Today,

Dan Johnston.