XM Radio Price Increase

Effective April 2, 2005, XM Satellite Radio will increase the price of its monthly basic service to $12.95. This will put them in line with their competition - Sirius Satellite Radio. XM Radio will also include two channels that were previously offered as premium channels as part of the basic service. These channels are XM Radio Online (previously $3.99/month) and the High Voltage Channel (previously $1.99/month).

For current customers, XM Radio will offer the option of selecting a 1-Year plan at the existing rate, as well as other multi-year plans at a further discount.

The multi-year plans are:

The Playboy Channel will remain a premium channel on XM Radio, at a cost of $2.99/month.

The High Voltage Channel on XM Radio features the talk radio duo Opie & Anthony. Sirius doesn't have a similar channel until Howard Stern arrives later in the year. Sirius has always offered online radio as part of its basic plan.

Commentary:

XM Radio is making a risky, but expected move. By setting their pricing and channel line-up closer to that of Sirius, they are making it more likely that new subscribers will select Sirius Satellite Radio now that there is no price advantage to sign up with XM Radio.

But with 3.2 million subscribers, the additional revenue will be useful in planning their further expansion. With a current subscriber base of 3.2 million, that is an increase of around $10 million each month - an increase of around 30%. The markets liked the increase, as XM stock jumped 14% on the announcement. But Sirius was also up (8%). You can see more on their stock history at Yahoo! Finance for XMSR and SIRI.

XM Radio is getting ready for the Howard Stern move later this year. By adding their High Voltage channel into the basic service, it is more likely that users will have a chance to check it out and see how it compares. And while it is unlikely that a significant number of XM Radio subscribers will jump to Sirius just for Howard (due to the added cost of new equipment), they are risking new signups.

With these changes, there is even less of a difference between the two services. The Playboy premium channel on XM targets a small audience. Outside of Howard Stern, the biggest difference remains to be the sports line up: Major League Baseball on XM and the National Football League on Sirius. It should be an interesting year for both of them.

For more information, check out the information from the XM Satellite Radio Press Release.

And for information for current XM Radio customers, there is more information from their FAQ pages.