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XM Rethinks Marketing Strategy, Targets iPods

WASHINGTON -- February 28, 2008: XM Satellite Radio CEO Nate Davis this morning detailed some cost-saving changes his company is making to its marketing strategy, and also revealed how he's working with Apple to make XM programming more accessible to iPod users.

Speaking this morning during XM's Q4 earnings conference call, Davis said, "On the iPod front, we have begun to podcast some of our regional content, and we have talked with Apple on a number of fronts about additional things we can do. But I wouldn't call it a strategic relationship - I would simply say we have a good marketing relationship and continue to talk to them about additional things we can do. Yes, we have ongoing conversations that strictly center on making sure that more people can get XM content, not only on XM Satellite radio but also through the front page of iTunes."

While XM is angling to expand with Apple, Davis outlined several areas where the satcaster is scaling back.

"In 2007, we moved much of our advertising from broadcast to online, which is a more cost-effective way to gain new subscribers," David said. "A greater focus on direct sales via online can improve subscriber acquisition cost performance, and deliver the accountability and tracking that simply doesn’t exist with broadcast advertising. In Q4 we eliminated the XM radio kiosk that located in many shopping centers, and scaled back on our in-store rep program."

Davis also discussed changes the company has made to its marketing relationship with the Starbucks coffee house chain. "Late last year we restructured our relationship with Starbucks, eliminating targeted marketing aspect but keeping the branding aspect with the Starbucks XM Café channel. We weren't getting what we wanted out of one part of the relationship, but the branding was working very well. We had an opportunity for 2008 and beyond to save some money by making it only a branding relationship, and we chose to do that."

He declined to get into specific costs, except to say that XM "accelerated some of the payments" owed Starbucks to pay them off. He did note that the original arrangement included $20 million in XM stock.


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