Wall Street Week/Fortune
Sun Feb 13 11:46:05 EST 2005
Brian and others brought up the "transition" from AM to FM beginning in the
Here's a scenerio which would instantly boost the status of Satellite radio
to the detriment of terrestrial offerings.
Now these will be rough figures, so I don't wish to debate that they aren't
exact; this is a scenerio so it's just that they might be feasable.
Either Chevrolet or Ford sells 4 million vehicles each per year. I own an
Edsel so we will chose Ford.
Ford goes out and negotiates between XM and Sirius for the rights to put
"Pre-Paid" satellite service in ALL their vehicles.
The yearly "retail" value of the least expensive single service is currently
$120 or so depending on prepayment.
But Ford is offering 4 Million, "lifetime subscriptions" in a year...so they
can negotiate it for ...say ..$50/yr for round numbers. Now the average
vehicle lasts for 10 years? (round figures again)
So, for $500 per vehicle lifetime (no more $, maybe much less because they
are first on the block) Ford supplies all their vehicles with Satellite
receivers and the winner of the satellite contract realizes $200 million in
income "automatically" EVERY YEAR, And still has the other 70% of the auto
and aftermarket to persue.
Now we can argue that $500 is signifigant in the purchase price of a car,
but the "option" cost of FM Radio, tape decks, CD Players etc has been
"rolled into" the price in the past....but, again, this is just a
One last option....Ford, instead of "buying rights" to satellite broadcasts,
"sees the light" and purchases enough of the stock in one of the services to
make it their deal.....win/win...
Let's pretend this is out of a college Management Course...but it's one way
to get there quickly...
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