Dear XM Radio, I’m not sure if your aware of this, but since you’re a local company, and I dig you, I just wanted to be sure you had your eyes on the ball: it’s not terrestrial radio you should be worried about, it’s podcasting. And here’s the bad news: right now your situation is looking a lot like AOL in its just-before-it-all-went-to-hell years.
Like AOL, you actually have two core services: providing media and providing a pathway to that media. AOL found out that there are at least two deep problems with going for that combinations of core services.
1. You get slammed by more focused companies on both ends. There’s a honeymoon period as consumers first enter the market and appreciate the simplicity of an all-in-one media solution, but inevitably more focused companies provide better options. Better ISP’s emerged. Better online content providers emerged. AOL was left being the best at neither and has since been floundering around and acting as if mergers & aquisitions alone could constitute a core business practice.
2. Both of your core business competencies can be thrown out by a disruption on either side of things. Consumers who turned to better ISP’s weren’t going to go out of their way to get AOL content. And consumers who fell in love with non-AOL internet content weren’t going to stomach any AOL inability or hassle in getting that content. To add to the problem, there’s a short-term strategic incentive to tightly bundle distribution and content–make small barriers and hassles to going outside the “happy family fold”–which adds to the volatility that a failure on either end of the business model takes down the whole ship.
And so here we have XM looking a lot like AOL circa 1980s. It’s a pretty darn good media distribution channel, and it’s a pretty darn good content provider, but it’s not great at either and that’s going to be a great big problem.
Moreover, it looks like podcasting, internet media distribution in general, is poised to do to XM what broadband did to AOL with its prolonged focus on dial-up access. AOL tried to whitewash over the problem that its distribution channel was getting distrupted by just pumping money and publicity into the content side of things, and sat providers are doing the same in response to net distribution, with big money content deals like Howard Stern and sports coverage exclusives. It’s a losing battle.
About the only remaining competitive advantage to sat radio distribution is the important feature of real-time content provision on the go, but we’re looking at the prospect of ubiquitous wireless broadband access in the not-too-distant future, so that’s going out the window soon enough.
So, umm, frankly XM you’re kind of screwed. Those expensive satellites you put up, well start thinking of selling off the communication bandwidth while it’s still valuable. If you want to at least make the five year mark feeling healthy, release a MyFi 2 in the next year with mp3 capabilities that are well integraded with the radio content (no clumsy stiching on of mp3 capabilities that doesn’t seasmlessly link to the radio content). Get the XM TiVo+iPod wunder-radio released soon and then start using the gobs of money you’ll get to retool the company by selling the satellites and rethinking how you make a radio network work–if such a thing can–in an age of internet media distribution.
XM radio execs, don’t feel too bad about the situation. Just think of all the national and local television networks that are going to be facing the same dilemma soon enough. Pull off the transition without loosing everything and you can at least charge them gobs of money in business consulting fees to help them navigate the same calamity.