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Strategy report
TO: Proximity Music Team FROM: Kristine Deprey DATE: September 29, 2009 SUBJECT: Sirius XM strategy analysis

This is my Sirius XM Radio Inc. strategy analysis. Although Sirius acquired its only direct competitor, XM radio, earlier this year, it is still struggling to turn a profit. Whether Gen-Y will adopt satellite radio as their new music provider depends on its ability to create a niche market and compete with free music providers.  Profile **  Sirius XM Radio Inc was created in August 2008 after Sirius radio acquired its only rival, XM Radio. Both companies had been licensed by the FCC in 1990 and are headquartered in New York. 
 * 

Sirius XM’s revenues come from:

· //Consumers// who purchase satellite radios and pay a monthly or yearly subscription fee · //Automakers// that purchase satellite radios and install them in new cars to attract customers. · //Retailers// that sell and install satellite radios for consumers

Sirius Satellite Radio currently has over 19,003,900 subscribers and generated $1.7 million in total revenue for 2008, up from $922,000 in 2007. The company has announced that it expects to achieve $400 million in fiscal 2009 adjusted income, up from the $350 million projected in May 2009 (Reuters 2009).

 Since the creation of this company in 1990, the competitive landscape has completely changed. It started as a monopolistic company, but because the satellites took longer than expected to launch, other digital music formats caught up with the progress. Although there are still no direct competitors, the company is struggling to compete with FM radio stations, digital music players (the iPod), Internet radio, and wireless radio. All of these could dampen the long term demand for satellite radio (Standard and Poor’s, 2009).
 * Competitive Landscape **

 Sirius XM strategy is based on making partnerships with automakers and developing new subscription plans: · A la carte pricing under which subscribers can choose a combination of programming offerings from the two providers, Sirius and XM which act as separate brands <span style="font-family: Symbol; font-size: 12pt; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol; msobidifontfamily: Symbol; msofareastfontfamily: Symbol; msolist: Ignore;">· <span style="font-family: 'Times New Roman','serif'; font-size: 12pt;">“Best of Both” programming offering
 * <span style="font-family: 'Times New Roman','serif'; font-size: 12pt;">Sirius XM’s Strategy **

With the weakening economic trend, Sirius XM is appealing to consumers through select FM radio station advertisements. They are aware of the slowing auto industry and are encouraging automakers to prepay subscription fees as a selling point for their cars. They announced that they are deferring the installation of a new satellite and the payment of bonuses to workers as a way to save money (Sirius XM Radio Inc.).

<span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> Although Sirius XM does not have any direct competitors, the installation, activation and subscription fees do not make ownership attractive to Gen-Y consumers. Also, the most common way of purchasing satellite radio is through the purchase or lease of a new car which is uncommon for most Gen-Y consumers.
 * <span style="font-family: 'Times New Roman','serif'; font-size: 12pt;">Gen-Y Implications **

I believe, however, the Sirius XM’s largest problem is the competition between free music services such as Pandora, and FM radio. Although satellite radio is specialized to the consumer’s taste, Pandora offers a similar service free of charge. FM radio has a benefit because it is a medium where consumers learn about new music while enjoying past hits without fees. Gen-Y is more likely to use a free music service.

<span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> Reuters. "Sirius XM Radio Inc." 25 September 2009. Reuters Stock Quote. 25 September 2009 <http://www.reuters.com/finance/stocks/overview?symbol=SIRI.O>.
 * <span style="font-family: 'Times New Roman','serif'; font-size: 12pt;">References **

Sirius XM Radio Inc. "2008 Anuual Report and Proxy Statement." 2008. Shareholder Information. 22 September 2009 <http://files.shareholder.com/downloads/SIRI/73365 1669x0x293836/ 84D36094-36E6-4663-8177- 44D0722D2048/SIRIUSXM2008 AnnualReport.pdf>.

Standard and Poor's. "Sirius XM Radio Inc." 25 September 2009. Standard and Poor's Stock Reports. 25 September 2009 <http://reports.standardandpoors.com.proxytu.research port.umd.edu/data/EQ/pdf/sr/8/82967n10.pdf>.

Blog proposal

 * <span style="color: black; font-family: 'Arial','sans-serif'; font-size: 10pt; line-height: 115%;">TO: **<span style="color: black; font-family: 'Arial','sans-serif'; font-size: 10pt; line-height: 115%;"> Proximity Music Team
 * FROM:** Kristine Deprey
 * SUBJECT:** Music Team Blog Post Proposal
 * DATE:** October 26

I propose that we do our Proximity Blog Post on the rivalry between music subscription services and free digital music providers. This post can be used to attract new clients to the use of satellite radio by enhancing their understanding of the service.


 * <span style="font-family: 'Arial','sans-serif';">Rationale **

Music subscription services are struggling to compete with online digital music providers because they appear to be offering the same service at higher prices. Sirius XM, however, offers a more specialized music experience by allowing customers to purchase subscriptions for certain types of music and providing genre specific stations. They also allow customers to listen to the same station anywhere in the country. By convincing more people to subscribe to Sirius XM, we can increase the technology used to provide the service and offer more customization to each consumer.


 * <span style="font-family: 'Arial','sans-serif';">Sources **

I recommend that we use Sirius XM’s youtube channel in our blog post to show the customization []. Sirius XM Radio Inc. "2008 Anuual Report and Proxy Statement." 2008. Shareholder Information. 22 September 2009 < [] 1669x0x293836/ 84D36094-36E6-4663-8177- 44D0722D2048/SIRIUSXM2008 AnnualReport.pdf>.

Report proposal
<span style="font-family: 'Times New Roman','serif'; font-size: 12pt; line-height: 115%;"> <span style="font-family: 'Times New Roman','serif'; font-size: 12pt;">TO: Proximity Music Team FROM: Kristine Deprey DATE: November 16, 2009 SUBJECT: Proposal for report on Sirius XM <span style="font-family: 'Times New Roman','serif'; font-size: 12pt; line-height: 115%;"> Sirius XM has been a struggling music business since the development of free music technologies. It now seeks to become a virulent competitor in the music industry through those new technologies. I propose to write a report on Sirius XM’s efforts to compete in this industry through the iPhone and other new technologies.


 * <span style="font-family: 'Times New Roman','serif'; font-size: 12pt; line-height: 115%;">Need **<span style="font-family: 'Times New Roman','serif'; font-size: 12pt; line-height: 115%;">

The once simple satellite radio subscription has broadened into many different types of medium.

<span style="font-family: Symbol; font-size: 12pt; line-height: 115%; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol; msobidifontfamily: Symbol; msofareastfontfamily: Symbol; msolist: Ignore;">· <span style="font-family: 'Times New Roman','serif'; font-size: 12pt; line-height: 115%;">Sirius XM is losing customers to free music providers like Pandora, and AM/FM radio that offer similar services. <span style="font-family: Symbol; font-size: 12pt; line-height: 115%; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol; msobidifontfamily: Symbol; msofareastfontfamily: Symbol; msolist: Ignore;">· <span style="font-family: 'Times New Roman','serif'; font-size: 12pt; line-height: 115%;">By trying to launch a new satellite, the company is trying to increase the number of channels and customers. <span style="font-family: Symbol; font-size: 12pt; line-height: 115%; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol; msobidifontfamily: Symbol; msofareastfontfamily: Symbol; msolist: Ignore;">· <span style="font-family: 'Times New Roman','serif'; font-size: 12pt; line-height: 115%;">The company is branching into new technologies such as the iPhone and iTouch to reach a new customer base. <span style="font-family: Symbol; font-size: 12pt; line-height: 115%; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol; msobidifontfamily: Symbol; msofareastfontfamily: Symbol; msolist: Ignore;">· <span style="font-family: 'Times New Roman','serif'; font-size: 12pt; line-height: 115%;">Sirius XM is offering a seven day free trial of their service to iPhone and iTouch users.

Satellite radio cannot survive without branching into new markets and adapting to new technologies. The company needs to change the idea of radio in the minds of users in order for them to remain a viable competitor in the music industry. Through the use of Apple products, the company hopes to increase subscribership and retain more customers while generating enough revenue to launch a new satellite.

Clients of Proximity that wish to reach Gen Y customers need this report to understand the role that this new technology will play in allowing them to reach a completely new customer base.

<span style="font-family: 'Times New Roman','serif'; font-size: 12pt; line-height: 115%;"> The proposed report, “iSirius,” will cover the following topics:
 * <span style="font-family: 'Times New Roman','serif'; font-size: 12pt; line-height: 115%;">Topics **

<span style="font-family: Symbol; font-size: 12pt; line-height: 115%; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol; msobidifontfamily: Symbol; msofareastfontfamily: Symbol; msolist: Ignore;">· <span style="font-family: 'Times New Roman','serif'; font-size: 12pt; line-height: 115%;">Sirius XM and the failing subscription music industry; <span style="font-family: Symbol; font-size: 12pt; line-height: 115%; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol; msobidifontfamily: Symbol; msofareastfontfamily: Symbol; msolist: Ignore;">· <span style="font-family: 'Times New Roman','serif'; font-size: 12pt; line-height: 115%;"> The free trial of Sirius XM offered for iPhone and iTouch users; <span style="font-family: Symbol; font-size: 12pt; line-height: 115%; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol; msobidifontfamily: Symbol; msofareastfontfamily: Symbol; msolist: Ignore;">· <span style="font-family: 'Times New Roman','serif'; font-size: 12pt; line-height: 115%;">The need for a larger customer base for specialized, subscription radio; <span style="font-family: Symbol; font-size: 12pt; line-height: 115%; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol; msobidifontfamily: Symbol; msofareastfontfamily: Symbol; msolist: Ignore;">· <span style="font-family: 'Times New Roman','serif'; font-size: 12pt; line-height: 115%;">The future of subscription radio.

The report will also include attachments that outline Sirius XM’s marketing strategy and current financial situation.

<span style="font-family: 'Times New Roman','serif'; font-size: 12pt; line-height: 115%;"> <span style="font-family: 'Calibri','sans-serif'; font-size: 11pt; line-height: 115%; mso-ansi-language: EN-US; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: 'Times New Roman'; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"> <span style="color: windowtext; font-family: 'Times New Roman','serif'; font-size: 12pt; font-weight: normal; line-height: 115%; mso-bidi-language: AR-SA; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin; mso-no-proof: yes;">CNBC.com. (2009, November 5). Sirius XM Radio CEO: Confident in Company's Future. <span style="color: windowtext; font-family: 'Times New Roman','serif'; font-size: 11pt; font-weight: normal; line-height: 115%; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;"> <span style="color: windowtext; font-family: 'Times New Roman','serif'; font-size: 12pt; font-weight: normal; line-height: 115%; mso-bidi-language: AR-SA; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin; mso-no-proof: yes;">Retrieved November 19, 2009, from CNBC: http://www.cnbc.com/id/33654831 <span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> This article analyzes the financial situation that Sirius XM is in. It discusses the 3Q earnings and gives an overview of the future the company will face with competition and investments.
 * <span style="font-family: 'Times New Roman','serif'; font-size: 12pt; line-height: 115%;">Sources **

<span style="font-family: 'Times New Roman','serif'; font-size: 12pt; line-height: 115%; mso-no-proof: yes;">Gilroy, A. (2009, June 18). //Car A/V Reacts To Sirius XM App.// Retrieved November 19, 2009, from TWICEMobile: http://www.twice.com/blog/Reporters_Notebook/17270- Car_A_V_Reacts_To_Sirius_XM_App.php <span style="font-family: 'Times New Roman','serif'; font-size: 12pt; line-height: 115%;"> Gilroy discusses the new iPhone app that Sirius XM is offering in order to boost subscription sales. From her point of view, once the seven day free trial membership ends, the users will return to using Pandora instead of paying for the music service.

Kharif, O. (2009, November 5). //Sirius XM: The Good and Bad Earnings News.// Retrieved <span style="font-family: 'Times New Roman','serif'; font-size: 12pt; line-height: 115%; mso-no-proof: yes;"> November 19, 2009, from Businessweek: http://www.businessweek.com/technology/content/nov2009/tc2009115_002716.htm <span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> Kharif outlines the future of Satellite radio by discussing the company's strengths, weaknesses and recent news. They state that growth is decreasing, investor expectations are lowering, big automaker concessions are unlikely, and that Howard Stern's departure could hurt the company overall.

<span style="font-family: 'Times New Roman','serif'; font-size: 12pt; line-height: 115%; mso-no-proof: yes;">Kim, G. (2009, February 11). //Why Did Sirius XM Fail?// Retrieved November 19, 2009, from Satellite Technology: http://satellite.tmcnet.com/topics/satellite/articles/50407-why-did-sirius-xm-fail.htm <span style="font-family: 'Times New Roman','serif'; font-size: 12pt; line-height: 115%;"> Kim outlines the reasons why Sirius XM could be filing for Chapter 11 bankruptcy. Through a lengthy article, he details the flaws in the company and how changes could be made to keep the company from going under. This will be the cornerstone of my report.

<span style="font-family: 'Times New Roman','serif'; font-size: 12pt; line-height: 115%; mso-no-proof: yes;">Matthews, B. (2009, March 25). //The Future of Sirius XM and The Internet.// Retrieved November 19, 2009, from Sirius Buzz: http://siriusbuzz.com/the-future-of-sirius-xm-and-the-internet.php <span style="font-family: 'Times New Roman','serif'; font-size: 12pt; line-height: 115%;"> Matthews argues a more optimistic future for satellite radio. He describes the issues with free internet radio which is the leading competition to satellite radio. The addition of commercials to free radio is expected to deter users and persuade them to pay for satellite radio.

Team conference presentation proposal
We could discuss:

The marketing strategy of Sirius XM and how they are trying to catch up with Pandora Pandora's advantages and disadvantages as well as Sirius XM's The type of users Appeals to Gen Y How the company's plan to increase customers

Sales letter and report prospectus
<span style="color: black; font-family: 'Arial','sans-serif'; font-size: 10pt; line-height: 115%; mso-fareast-font-family: 'Times New Roman';">December 1, 2009

Mr. Mike Schipero, Director of Marketing Toyota, Inc. Tokyo, Japan

Dear Mike:

I am glad that I had a chance to talk with you yesterday at Proximity’s Next Generation Media seminar regarding Toyota’s need to promote its brand to Gen Y consumers. Along with this letter, you will find a prospectus for the report we discussed describing the new satellites and iPod features being developed by Sirius XM satellite radio.

As you explained yesterday, Toyota feels the need to reach Gen Y and establish brand identity with them now in order to sell its models as they begin the process of purchasing a car. I believe that Proximity can collaborate with you on a comprehensive campaign that uses free trials and incentives to achieve that goal.

Our company can provide you with customized survey and focus group results to help shape Toyota’s already green image into a more technologically advanced, progressive company. Our consultants can advise your sales force on how to advertise new products, and our production teams can make multi-platform ads that will appeal to Gen Y. In addition, the company also employs trained student marketers who can give input about satellite radio in cars. Our research shows that using student representatives to give input is far more effective in reaching Gen Y than buying conventional banner ads. <span style="color: black; font-family: 'Arial','sans-serif'; font-size: 10pt; line-height: 115%; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: 'Times New Roman'; mso-fareast-language: EN-US;"> I invite you and your staff to join us at Proximity’s Towson office for a special focus group session on Toyota’s Gen Y brand image. After that session, you can meet with members of our group to discuss how Proximity can help you meet your marketing goals.

Sincerely, Kristine Deprey Associate Media Analyst

**<span style="color: white; font-family: 'Arial','sans-serif'; font-size: 18pt; mso-bidi-font-size: 12.0pt; mso-fareast-font-family: Arial;">PROXIMITY reports ** || || <span style="font-family: 'Arial','sans-serif'; mso-fareast-font-family: Arial;"> //<span style="font-family: 'Arial','sans-serif'; mso-fareast-font-family: Arial;">connecting with Gen Y using on-demand media // ||^  || **<span style="color: maroon; font-family: 'Arial','sans-serif'; font-size: 18pt; mso-ansi-language: EN-US; mso-bidi-font-size: 12.0pt; mso-fareast-font-family: Arial;">ISirius XM ** <span style="font-family: 'Arial','sans-serif'; mso-ansi-language: EN-US; mso-fareast-font-family: Arial;">Kristine Deprey <span style="font-family: 'Arial','sans-serif'; font-size: 18pt; mso-bidi-font-size: 12.0pt; mso-fareast-font-family: Arial;"> //<span style="font-family: 'Arial','sans-serif'; mso-ansi-language: EN-US; mso-fareast-font-family: Arial;">As music subscriptions fail, Apps succeed // || <span style="font-family: 'Arial','sans-serif'; mso-ansi-language: EN-US;">As music becomes available through services offered for free, Gen Y is shifting away from the subscription services they were once attracted to. This technologically savvy demographic will not pay for a generic music service. There are too many free music services tailored to their needs and desires. <span style="font-family: 'Arial','sans-serif';"> ||
 * //__<span style="color: #333300; font-family: 'Arial','sans-serif'; font-size: 18pt; mso-bidi-font-size: 12.0pt; mso-fareast-font-family: Arial;">The problem __//**
 * //__<span style="color: #333300; font-family: 'Arial','sans-serif'; font-size: 18pt; mso-bidi-font-size: 12.0pt; mso-fareast-font-family: Arial;">The problem __//**
 * <span style="color: #333300; font-family: 'Arial','sans-serif'; font-size: 18pt; mso-ansi-language: EN-US; mso-bidi-font-size: 12.0pt; mso-fareast-font-family: Arial;"> ||

//<span style="color: #333300; font-family: 'Arial','sans-serif'; mso-ansi-language: EN-US; mso-fareast-font-family: Arial;">Proximity //<span style="color: #333300; font-family: 'Arial','sans-serif'; mso-ansi-language: EN-US; mso-fareast-font-family: Arial;"> focus group results show that Gen Y listeners still value the freedom of choice while listening to music, in a group or alone. They //will// pay attention to subscription music services in exchange for maximum choice and freedom of selection. <span style="color: #333300; font-family: 'Arial','sans-serif'; mso-ansi-language: EN-US; mso-fareast-font-family: Arial;">This report details how Sirius XM and Apple are teaming up to build a new, subscription based music alternative by adapting Sirius XM satellite radio to the iPhone and iTouch. It will serve music stations based on genre or music preference available on a small unit that is already being used to listen to music. The convenience and lack of commercial interruptions will entice Gen Y users to purchase a subscription. <span style="color: #333300; font-family: 'Arial','sans-serif'; mso-fareast-font-family: Arial;"> <span style="color: #333300; font-family: 'Arial','sans-serif'; mso-fareast-font-family: Arial;"> <span style="color: #333300; font-family: 'Arial','sans-serif'; mso-fareast-font-family: Arial;"> ||
 * //__<span style="color: #333300; font-family: 'Arial','sans-serif'; font-size: 18pt; mso-bidi-font-size: 12.0pt; mso-fareast-font-family: Arial;">Proximity’s on-demand media solution __//**
 * //__<span style="color: #333300; font-family: 'Arial','sans-serif'; font-size: 18pt; mso-bidi-font-size: 12.0pt; mso-fareast-font-family: Arial;">Proximity’s on-demand media solution __//**
 * <span style="color: maroon; font-family: 'Arial','sans-serif'; mso-fareast-font-family: Arial;">

Available now at www.proximity.edu **