One of the ways to boost subscriber rates in business is to offer service to the mass public. Recognizing this potential, XM Satellite Radio [XMSR], one of the two companies building a nationwide subscription radio system, is attacking vertical markets from the automobile industry to the airlines. Stephen Cook, senior vice president for sales and marketing at XM Radio is focusing his team this year on saturating as many markets as possible with the next-generation radio technology.Slated to roll out in 2001, XM Radio will beam 100 channels of music, news, sports, talk and children’s programming directly from two satellites to vehicles, home and portable radios coast to coast. Cook spoke with SPACE BUSINESS NEWS Reporter Nick Mitsis recently and relayed the business challenges and market segments XM plans to focus on as it enters the final stretch of production before its service is launched. Here is what he had to say:

SBN: What Is The Biggest Challenge You Face In Selling A Product That Does Not Exist?

Stephen Cook: We actually have the advantage that radio technology does exist and is one of the highest listener media available. Our view is that we are capitalizing on radio’s established popularity. Likewise, we are trying to bring forward the next-generation of radio because there really has not been any major technological innovations in radio in the past 45 to 50 years. This is our opportunity to freshen up radio a little bit. Make it digital, create a greater breath of programming and meet the challenge of delivering it nationally which does not currently exist.

SBN: What Is XM’s Approach To National Distribution?

Cook: Our radios will be available in traditional electronic and audio retailers. In addition, we are perusing the new car market starting with a relationship with General Motors; we have relationships in place with the commercial trucking industry; and we have an agreement within the recreational boating industry with a company called Marine Audio. The company is the dominant player within the industry in making marine-ready radios for consumers.

SBN: How Much Nautical Coverage Does Your System Offer?

Cook: Even though the satellites will focus on directly covering the continental United States, the signal wave tends to propagate beyond that to a certain extent. Our engineers currently estimate that we will have roughly 200 miles of ocean coverage around the perimeter of the United States. We anticipate that the recreational ocean-going boaters will benefit from this service.

SBN: Why Has XM Gone After The Car Rental Market?

Cook: The rental car market is going to serve a couple of purposes. When people travel, be it business or pleasure, and they rent a car, they want to listen to the radio and we definitely want our product there. It also represents a great trial opportunity and an awareness-building opportunity in the early years. That is why we have aggressively gone after this market segment early on because it will turn out to be a great marketing exposure vehicle for us. Another company that falls under the same idea is LiveTV Inc., which sells audio products to the commercial aircraft industry. The shorter flight segment aircraft, which make up the bulk of the commercial flights today, cannot afford to build onboard entertainment units commonly enjoyed on larger aircraft. LiveTV is trying to build out the short-haul segment of the commercial aircraft industry with audio entertainment. Our signal will hit aircraft perfectly so this, too, will be a great exposure for us.

SBN: Of All The Market Segments, Which Has Been Most Difficult To Sign On With XM?

Cook: The complexity of the new car market. The long lead-time with manufacturers in installing our system has been most challenging. It has not, however, been difficult in terms of selling them on the concept, but rather finding a way to integrate a new product into the complexity of all the electronics that go into a vehicle today.

SBN: How Will Line-Of-Sight Disconnect Affect Your Service?

Cook: For short-deterioration where you go out of line of sight for a period of time, there is a buffering system built in that will accommodate four seconds of signal loss so the consumer will never miss a beat. Second, for instances where a user passes an individual tall building, if line-of-sight gets blocked from one side, our second satellite will pick up the signal. Finally, in more than 70 urban centers nationwide, we will construct a terrestrial repeater network of 1,500 towers that will receive the satellite signal and rebroadcast it throughout the city. We, therefore, feel we will effectively blanket our entire coverage area.

SBN: How Is XM Attacking The Marketplace?

Cook: We are spending roughly $100 million in our launch marketing campaign to build total awareness to consumers for our product. The campaign will consist of television, radio and print advertising. Likewise, our campaign is targeting total awareness to be reached within the first six months. In addition, we are partnering with Sony, Pioneer, Alpine and other major equipment manufacturers. Lastly, our programming is also aligned with major players such as USA TODAY, CNN and Sporting News. These elements will help consumers feel comfortable with XM and add a sense of familiarity behind our product. Our service launch will have limited availability in some of the lead markets in first quarter 2001 and full national availability in second quarter 2001.

SBN: What Have Been The Top Lessons Learned Throughout This Process?

Cook: One of the biggest surprises has been that people really seem to get it in terms of satellite radio and it has been catching on. The real lesson learned, however, is seen through our partnering with DirecTv. In going into new technology like this, it is really paid dividends to partner with experienced providers of related technologies.

SBN: Going Forward, What Worries You Most?

Cook: Had you asked me the question a year ago, I would have said that with a new business there are financial and technology risk worries. What has happened, though, is that we have raised nearly $1 billion now and most of the financial risk is behind us. I think that we are now so far down the path in terms of our technology development milestones that everything is going to work as the engineers have designed it. At this point, all that is left is to execute. I guess the complexity of the launch and execution is the remaining big challenges for us.