Satellite Radio and Diffusion of Innovations:

1
Satellite Radio and Diffusion of Innovations

• How do you study the early adopters of a new
  technology?

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Emergence of SDARS

• World Space
• The original satellite radio idea was to develop
  an affordable way of transmitting information and
  radio to rural areas in Africa.
• Launched its first satellite in 1998.

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Emergence of SDARS

• Potential in the United States for such a service
  in the 1990s?
• Disposable incomes
• Terrestrial radio becoming inundated by
  commercials
• Quality of AM/FM radio

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Emergence of SDARS

• American Mobile Radio (now XM Satellite Radio)
  branches off from World Space.
• CD Satellite Radio (now Sirius) also vies for the
  U.S. market.

5
Emergence of SDARS

• Several companies submit bids to the FCC for two
  newly allocated licenses.
• The companies that are now called XM Satellite
  Radio and Sirius Satellite Radio win the bids.
• They paid over 80 million dollars each to
  participate in this government-mandated duopoly.

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Benefits of SDARS

• The convergence of digital satellite technologies
  with radio-based programming allows the consumer
  to access his or her favorite XM or Sirius
  channels from virtually anywhere inside the
  United States.

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Benefits of SDARS

• Since 2001-2002, both satellite radio services
  offer approx. 100 channels of music, talk, news,
  sports, and weather for a monthly subscription
  fee of 12 - 13.
• Sirius runs no commercials XM runs commercials
  on several channels.

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Complications for SDARS

• The task that satellite radio companies like XM
  and Sirius face is to convince consumers that
  they should pay for a service that is readily and
  freely available through the FM/AM bands.

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Complications for SDARS

• Consumers must buy a new receiver that gets
  either the XM or Sirius signal. (AM/FM is also
  available with these receivers)
• Currently, neither company has come out with a
  receiver that is both XM and Sirius compatible.
  This is in the works right now.

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Competition for SDARS

• It is reported that at least 200 million
  listeners per week still tune into commercial
  radio.
• Out of 100 million U.S. households, satellite
  radio has only 4 percent of the audience.

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Consumers of SDARS

• In March of 2005, XM reported that they had more
  than 3.77 million subscribers, compared to Sirius
  who was reporting approximately 1.5 million.
• With much of the nationwide audience virtually
  untapped, both companies are currently competing
  for those potential subscribers.

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The Adoption Rate of SDARS

• Most consumers have not yet adopted the satellite
  radio subscription service offered by either of
  these two companies, and reasons for this
  adoption rate have yet to be examined in
  scholarly detail.

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Diffusion of Innovations

• Adopters of an innovation are classified on the
  basis of innovativeness, the degree to which an
  individual or other unit of adoption is
  relatively earlier in adopting new ideas than the
  other members of a system
• The rate of adoption is influenced by the
  characteristics of adopters related to
  innovativeness socioeconomic status, personality
  values, and communication behavior.
• Most of the generalizations about characteristics
  have been positively related to innovativeness,
  meaning innovators score higher on these
  independent variables than do laggards

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Diffusion of Innovations

• According to diffusion literature, there
• are five attributes of an innovation that
• determine the adoption rate of an
• innovation.
• Relative advantage
• Compatibility
• Complexity
• Trialability
• Observability

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Relative Advantage

• Relative advantage is the degree in which an
  innovation is perceived as advantageous over an
  idea or technology that came before it.
• ability to be picked up by a subscriber almost
  anywhere in the United States
• satellite radio services also offer
  commercial-free programming

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Compatibility

• The degree to which an innovation is perceived as
  being concordant with existing values, past
  experiences, and requirements of potential
  adopters.
• The satellite radio companies, from the
  beginning, have set out to make their product and
  service highly compatible with existing
  technologies such as personal computers and
  automobiles.

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Complexity

• New ideas that are simpler to understand are
  adopted more rapidly than innovations that
  require the adopter to develop new skills and
  understandings.
• satellite radio is similar in function and design
  to existing AM/FM radios

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Trialability

• The degree to which an innovation may be used on
  a limited basis.
• Consumers who buy certain automobiles with the
  existing satellite radio technology already
  installed have the option to use the product on a
  promotional basis.
• Its reported that six out of ten XM Satellite
  Radio promotional subscribers convert to
  self-paying when the promotion ends

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Observablity

• The degree to which the results of an innovation
  are visible to others.
• Since both satellite radio services offer their
  products in certain stores and automobiles,
  satellite radio is highly observable to the
  consumer.
• The service is also marketed on television, often
  with the automobile that it is offered in.

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Who are the adopters?

• Application of the diffusion model to satellite
  radio subscribership could provide some insight
  into the diffusion of this new radio service.
• Because satellite radio is still in its early
  stages, it is important to examine who the
  current adopters are and how they differ from
  future subscribers.

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Problems with Diffusion Studies

• How does one obtain a representative sample of
  satellite radio subscribers?
• Privacy of subscribers
• Snowball sampling
• Internet research?
• Chat forums exist, and adopters would be
  attainable.
• However, this study would not be generalizable,
  it would be descriptive at best.

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Problems with Diffusion Studies

• Findings from various diffusion studies of
  innovative technologies show mixed results for
  certain factors, such as socioeconomic
  characteristics and communication behavior.
• However, reasons for these discrepancies may be a
  result of the targeted consumer audience of these
  innovations.
• Certain technologies are directly marketed to
  very particular segments of the consumer market.
  Research I have looked at has yet to address this
  possibility, which may be skewing results of
  various diffusion studies.

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Problems with Diffusion Studies

• The diffusion of innovation model is largely
  linear.
• Consumers are not a consideration in the
  development of the technology that may evolve
  over time.
• Social Construction of Technology theory
  addresses this factor. (SCOT)

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Suggestions for the Current Study

• What is the best way to study adopters of a
  technology such as satellite radio?
• Is the diffusion of innovations theory relevant
  to todays adopter studies?