1. Premium pricing; and
2. Exclusive or otherwise compelling content.
Generally speaking, you need these two things.Satellite radio has them and stands out because it targets a highly coveted niche audience, comprised largely of 35-to-64-year old affluent males. Sirius runs programming that appeals to this less fickle set and can count on them to pay every month, even after a price hike here or there. In recent years, Sirius has hit users with two price increases -- one artificial, one direct -- and subscriber growth did not miss a beat. On the downside, satellite radio faces similar problems as AM radio did while it was dying -- it could end up stuck with a dead user base if it doesn't find ways to embrace younger audiences through digital channels, a better mix of content and different pricing schemes that include the freemium model. Lots of folks scoff at free, but there's something to be said for the model, particularly if you cannot pull off No. 1 and cannot max out on No. 2. Free, traditional radio still dominates overall radio listening -- blowing away both satellite and Pandora (P). It should come as no surprise that the alternative service with the largest audience, relative to traditional radio, is Pandora, not Sirius, not Spotify. These conversations must focus on not only the business as it hums today (Sirius wins hands down in that regard), but on the future of the business in a changing world. We're not even close to being in a place with dust firmly settled. You can listen to practically any piece of music you are ever going to think of -- free and on-demand -- on the Internet. YouTube continues to emerge as a resource for this, especially among young people. The free possibilities are just about endless. If you expect enough people to pay for your service on a monthly basis so that it can work as a viable long-term business, you absolutely need something miles beyond distinct and head and shoulders above excellent. It's all about scale. I have hit that theme hard over the last couple weeks because all others refuse to address it. Maybe they don't think it's important. Or, like the music labels, maybe they're smoking the pipe dream that large numbers of people will pay money each month to listen to music they can get for free elsewhere. Look at subscription-based services. The ones that thrive -- i.e., they're not losing money, bleeding cash or otherwise hurting -- charge premium prices, have exclusive and ultra-compelling content or both.
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