Satellite radio is a technology that offers a radically new way to listen to radio. XM's service uses advanced satellite capabilities and elaborate terrestrial receiver architecture to deliver a broad range of high-quality radio programming nationwide. In early 1998, Robert Acker, XM's director of strategic planning, must develop a marketing strategy for this new radio service. There are several decisions that the company must make to finalize the business plan. First, XM must decide which of two business models to pursue, whether to place an emphasis on charging customers a monthly subscription fee or whether to rely more on earning revenue through advertising. In addressing this issue, management must consider the value that XM radio might bring to different consumer segments compared to existing radio modalities (AM, FM) and in relation to its only competitor in satellite radio – SIRIUS. In addition to choosing a business model, it is also necessary to explore how best to approach and leverage manufacturers and channel partners, considering the highly unknown and high-risk technology. The purpose of this report is to analyze the possibilities and outline possible strategy recommendations for XM Radio. The following areas will be examined: • Market and Competition • Business Model • Pricing • Production and Distribution Channels Market and Competition The primary target market for satellite radio is expected to be adults between the ages of 25 and 50. These are the customers who earn the most and are willing to pay extra for a quality entertainment service. This target market can also be divided into smaller segments. Key segments are: • Truck drivers and RV owners (about 6 million) • Commuters who drive more than 90 minutes a day • Business travelers who spend much of their time in the car (such as real estate sales agents) • Workplace listeners, including retail outlets with a need for continuous, non-stop music • Residents in disadvantaged rural areas. • Sports fans (e.g. NASCAR) These target groups spend an extraordinary amount of time listening to the radio, especially in machine, and they should be extremely receptive to the XM product because of their constant need for radio entertainment and willingness to pay for it. As a result of the FCC auction, XM's only competitor in the satellite radio arena is SIRIUS. But at the same time there are other sources of entertainment that could be perceived as potential competitors for XM.• Traditional radio (AM/FM): is currently free, but offers only homogeneous and superficial playlists with average audio quality.