Report: Satellite Radio Will Soar

Satellite Radio will reach more than 20.1 million U.S. households by 2010--up from a reported 4.5 million subscribers at the end of 2004, according to a Forrester Research report released this week. The report, which examines the emergent digital audio space, found that satellite radio subscriptions grew 150 percent in the United States from 2003 to 2004.

Forrester's report, "The Future Of Digital Audio," covering satellite to online radio and podcasting, predicts that nearly half of all U.S. households with broadband, and 30 percent of all U.S. households, will be tuned into online radio by the end of the decade.

Ted Schadler, research vice president at Forrester and the report's author, said that while the rules of the game were changing, there was no reason why existing players couldn't adapt. "If radio and music executives can successfully shift their thinking to embrace new audio delivery methods, both industries will benefit from new revenue streams and increased consumer loyalty over the next several years," Schadler said.

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The best approach for companies in an increasingly fragmented and consumer-driven market, said Schadler, is to hedge their bets by opening as many content channels as possible. That strategy means investing in fringe segments like podcasting and high-definition radio. The report actually foresees significant growth in podcasting adoption through 2010, estimating it will reach 12.3 million U.S. households. And while Forrester predicts high-definition radio growth will lag behind satellite growth, it estimates that high-definition radio will reach 9.7 million U.S. households by 2010 as broadcasters embrace the technology and high-definition receivers drop in price.

The report further predicts that high-definition radio will bring high-definition broadcasting to AM/FM radio, offering new programming and features like "traffic information integrated with onboard navigation systems and program guides that give DVR-like control to radio."

In the report, Schadler explains that companies will need to offer more economical multi-tier subscriptions in order to reach the majority of U.S. households. This will be especially critical beyond 2010, when the technology's early-adopters--"higher-income, entertainment-oriented, technology-optimistic households"--meet their demand, the report explains.

Research firm Gartner is more conservative than Forrester, forecasting that about 9 million U.S. consumers will have subscribed to satellite radio by 2008. "Our numbers tend to be more conservative," said Laura Behrens, an analyst with Gartner G2. But, she added, "a lot could change between 2008 and 2010."

Behrens agreed with Schadler's recommendation that companies diversify their content channels, adding: "It's easier to compete in more of these channels because the cost of entry is so low."

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