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In an interview this morning with Fool Jeff Fischer, an XM Satellite Radio (Nasdaq: XMSR) executive called the move "desperate looking."

Once again, the Motley Fool shows their true colors and gross XM patronage.

Of course an XM exec is going to discredit the deal in order to steal the limelight. Thankfully, the success lies not in the Fool's or XM's opinion.

I'd like to offer my take on Sirius' strategy to show what a laugh the Fool article is.

Rather than spending 60+ million per year on mass media marketing (XM spent 58 million in 2001 alone), Sirius has chosen to invest in content. Looking at it from this angle makes it look like a bargain. By building the marketing into the service itself, rather than wasting millions on tv ads, Sirius will be able to tap a loyal subscriber base, as well as continue to leverage their premium programming.

The new trend in the post broadcast-era is to build things worth noticing right into the product. The NFL is something that will be noticed in a big way. Sirius is not slapping on marketing as a last-minute quick-fix, but understanding that if the offering isn't remarkable, it won't last.

Look at the success of DirecTV's Sunday Ticket:

DirecTV keeps NFL games in $2B deal

The five-year deal is said to be worth close to $2 billion. It calls for about three times the annual fee of the current pact. The deal, however, will let the NFL sell a package to cable after 2005.

About 1.5 million of DirecTV's 11 million subscribers pay the additional $180 a year for the service, and it's a key marketing draw in signing up new customers.

DirecTV CEO Eddy Hartenstein says that since 1995, the NFL Sunday Ticket has become "our flagship service. It is the package that more than any other is the differentiator for us against cable and everyone else."


From a marketing perspective, this is a hell of a deal. Here's why:

1) It gives SIRIUS instant credibility. Sirius will join the ranks of mega-brands Pepsi, Budweiser, Coors and Motorola. From the looks of it, it's not just a programming deal, but a major-label sponsorship.

2) The $133 cash deal is amoritized over 7 years. That's 19mil/yr. Much less than XM spends on one year of broadcast ads. $58 million in 2001, and 15+ million up to July of this year. Since the season is drawing to a close, I wouldn't doubt it Sirius didn't have to pay anything '04.

3) Ability for Sirius to use the NFL brand in store, print, and television ads. The lucrative 18-35 market (and the NFL extends way beyond these demos) will equate Sirius as the preferred choice.

4) The Music/Sports Experience - We've seen the line between sports and entertainment blur over the past few years. The NFL kicks off the season with a huge music & media blitz in NYC every year. Remember Britney Spears and Mary J. Blige? The halftime shows feature big name stars and Sirius will be able to leverage these events across the service platform.

Jeff
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