Satellite Radio's Big Opportunity: Whole Home Audio

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The U.S. Census Bureau estimates that there are over 113.5 million households in the United States this year. Of those, 61 percent have a broadband connection and 28 percent have a home network, according to Forrester Research.

Now that's more than 69 million broadband-enabled, and 31 million networked households in the U.S. today.

With numbers like that, why try to reinvent the wheel? The ground work has already been laid. Satellite radio's next big opportunity is to use the internet to penetrate into the home.

The main hurdle, of course, is how to get consumers to accept it.
Enter the world of whole-home audio.

Over the past three years, there has been a slow growth in what is known as the "whole-home audio" market led primarily by companies like Logitech and Sonos. These devices give consumers the ability to listen to digital content in multiple rooms of their home.

And that's the key: multiple rooms.

See, for many consumers right now, their home entertainment systems (usually consisting of TV, a DVR/TiVo, Cable or Satellite setup, surround sound system, etc.) are the primary way of listening to audio entertainment at home.

These systems have essentially replaced "radio" in its traditional sense for at-home listening - which is why terrestrial radio depends so much on "drive time" - and it's also points to some good early decisions made by Sirius and XM to be available on DISH Network and DirecTV, respectively.

But what about those multiple rooms? Even with our big screen TVs and booming surround sound systems, it's still very difficult to listen to digital audio across multiple rooms.

Unlike the conceptually similar MP3 player market, the whole-home audio device market has not hit the top of the charts.

Yet.

At 28%, enough U.S. homes are now networked to make whole-home audio feasible. Plus, music labels have freed the music from the complex constraints of previous DRM schemes.

So while these two factors create a "perfect storm" from the supply-side, it doesn't necessarily mean that consumers will adopt to this category. Especially in trying economic times.

The secret, of course, boils down to the basic convenience that these devices can offer - not just within the category, but also in comparison with other ways to get the same benefits of whole-home listening. Forrester seems to think there's growth potential in this category, continuing from this year and beyond.

Forrester's study (I'm not allowed to publish it, sorry) also uncovered some pretty interesting things about home-listening, like the fact that 33 percent of consumers already get whole-home audio... simply by turning up the stereo.

Whether they know it or not, consumers currently engage in a host of whole-home audio behaviors to play music across multiple rooms in the home. But most people don't bother with fancy technology, instead they prefer relatively simple (and cheap) solutions.

Behaviorally, these consumers are broken up into three different buckets:


  • No-tech
    These are people who simply make do with what they have around the house, including the one-third of listeners who just turn up the volume so that it can be heard in the next room. More than a fourth - 28 percent to be exact - of online adults have radios in more than one room, alternating between different units as they move throughout the house.

    Some 21 percent do the same thing with multiple CD players, transporting media from one device to the next, while a mere 16 percent carry MP3 players around the house.
  • Low-tech
    While the previous group requires no additional technology beyond the devices they already have, a few consumers have gone as far as to arrange low-tech ways to spread the sound around.

    Just 7 percent have wired a speaker in one room to hear audio from a nearby room, while 6 percent employ MP3 player docking devices to do the same thing.
  • High-tech
    And then there's the 3 percent of online consumers that say they employ some kind of wireless speaker system to transport the sound. That includes the 2 percent who have already deployed a whole-home audio technology.

So what does this all mean for satellite radio?

First off, it points to an opportunity for Sirius XM Rado Inc. to insert itself into this arena. Sure, they already have a partnership with Sonos dating back to mid-2007 to include Sirius Internet Radio as one of the services offered. But that's just one step.

Back in March, we saw signs that point to an evolving internet radio strategy for Sirius XM. Rumors were swirling that a partnership with Roku was in the works, not to mention a separate potential partnership with Boxee to boot.

The next big opportunity for Satellite Radio is to become distribution agnostic.

Just as Slacker is now embedded in Sony Bravia TV sets, Sirius XM should look to embedding themselves into every internet-enabled device on the market. Especially those that help drive deeper into multi-home audio technology.

Satellite Radio has the benefit of holding onto some amazing exclusive content. Content that millions of people pay money for every month. The next step in the evolution of the medium is to remove the "satellite" from "satellite radio" and to separate itself from complicated wiring and installation instructions.

Stay tuned for Part 2 of this post, where we explore how the car can play into all of this...







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