Wednesday, November 2, 2011

Will SiriusXM Fall Into The Netflix Hole?

As we are proud to say, "it's the economy, stupid", we still seem to follow the same mistakes rather than learn from them. Netflix clearly fumbled the ball with a huge price increase at the wrong time. And Netflix continued to heap on more misery upon itself with a whole changing of the business model. So is it Sirius' turn to fumble with a price increase?

Sirius had troubles this past quarter with subscriber growth and a price increase on January 1 will only further erode subscription. "The company also had a harder time getting customers to commit to its service once its promotions end. It acquires most of its new subscribers by offering free trials of its service when people buy new cars. The conversion rate of trial subscribers who became full paying subscribers fell to 44.4 percent in the third quarter, down from 48.1 percent a year earlier." The price elasticity model is in place whether these companies want to see it or not. Consumers are rebelling at higher prices by seeking cheaper alternatives or cutting off altogether.

But it seems clear that Sirius is not about to change its pricing policy. CEO Mel Karmazin has said that the company has not heard any issues with its price increase; then again, they haven't put it into effect either. Once consumer receive their bills, there will no doubt be backlash. How it willcompare to what happened with Netflix we can only wait and see.

No comments:

Post a Comment