What's up (or down) with satellite radio?Has satellite radio lost some of its luster since the day Sirius Radio signed Howard Stern? Sales may still look strong but there are a couple of factors that neither XM nor Sirius wants to talk about. The first is called churn. Churn is the percentage of subscribers that do not renew their subscriptions at the end of their contract period. So when you read that, say, 100,000 people signed up for either of the two services, the next important question is how many subscribers did you lose -- 5%, 7% or even 10%? The second important number that the satellite providers never discuss in public is the cost of acquiring a subscriber. For a satellite TV service such as Echostar, the acquisition cost might run as high as $350 per household but this is an acceptable number, because the company knows it will get its money back, plus a profit, as satellite TV subscribers remain subscribers for a very long time. But, outside the companies themselves, no one knows how much it costs to acquire a satellite radio subscriber, nor how long that person must remain a subscriber for the company to turn a profit. Given the churn and the cost of acquiring a subscriber, some experts argue that it's unlikely for both satellite radio services to survive and that they'll either consolidate or one will go under. Compare this with HD Radio, where there is no churn rate and no cost to acquire a subscriber, and it becomes clear that HD Radio has a very bright future indeed.
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