Should XM and Sirius Lower Their Prices?

Many Wall Street analysts expect satellite radio companies to keep increasing their prices. But a new Forrester Research report indicates that XM and Sirius might actually want to start thinking about cutting subscription price tags, instead.
Olga Kharif

In the past year, satellite radio company XM actually increased its prices. And this year, Wall Street analysts have been saying that both XM and its rival, Sirius, could increase prices again; the users, their thinking goes, will pay a bit more anyway.

But recently, I got to see a Forrester Research January study that seems to indicate that both companies should, in fact, cut prices -- big time.

Forrester surveyed 4,752 U.S. households and discovered that only 3% of them plan to buy satellite radio service in the next 12 months.

What gives? Consumers are, apparently, waiting for lower prices. They are not willing to pay $12.95 a month for satellite radio service. Forrester found that 22% of consumers would sign up for the service if it were cheaper. And 19% of those surveyed might consider signing up if the radios themselves are more heavily subsidized.

I think this survey could be very telling in terms of what satellite radio companies might really do this year. As XM and Sirius chase growth, they might start dropping prices. The key for them will be to figure out how to do that profitably.

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