WorldSpace Satellite Radio: Fading Signals?
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Case Code: BSTR239 Case Length: 22 Pages Period: 1990-2006 Pub Date: 2006 Teaching Note: Available |
Price: Rs.400 Organization: WorldSpace Corporation Industry: Media, Entertainment and Gaming Countries: The US, India, Africa Themes: Corporate Strategy |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
A Slow Start
In the initial years, WorldSpace did not have a clearly articulated business model as the satellite radio business was still in its infancy. When the company's services were launched, its revenues had come only from receiver sales and from the fees it received from leasing out satellite space to individual channels. All the channels were offered free of cost to those who bought the receivers...
Launch of A Subscription-Based Model
After its losses in 2003-2004, WorldSpace introduced a subscription-based model in all its markets in a bid to improve its business. The prices of receivers were reduced and yearly subscriptions were introduced. When this scheme also did not bring in the expected number of subscriptions, WorldSpace introduced special offers to increase subscriptions. For instance, in 2005, it launched a festival offer in India by reducing the entry price for the service and offering quarterly subscription packages. The company also tried to attract subscriptions by providing exclusive Indian channels via AsiaStar...
WorldSpace in Africa
One of Samara's initial objectives in launching WorldSpace was to spread awareness about AIDS and provide information on other developmental issues in the developing regions of the world. In his view, many African countries were deprived of important information as they lacked the infrastructure to receive and disseminate such information. According to him, a service like WorldSpace could deliver this information to empower people, particularly in the poorer areas of Africa...
WorldSpace in India
India was believed to be a market with great potential for WorldSpace, not only because of the large radio audience in the country, but also because the Indian Government had opened up FM broadcasting to private players in 2000. Until then FM, along with the AM channels, had been broadcast exclusively by the government-owned All India Radio (AIR). Despite the potential competition from local FM channels, the opening up of the market was said to have created opportunities for global players like WorldSpace...
The Strategy Change
In August 2005, WorldSpace India decided to lower the initial cost of subscribing to the service. This included reducing the cost of receivers from about Rs.5,500 to Rs.1,999, inclusive of the subscription fees for three months. This drop in price led to spurt in subscriptions...
Promotional Campaigns
When WorldSpace India was launched in 2000, it launched a nationwide advertisement campaign, even though the service was initially introduced only in the cities of Bangalore and Chennai. After the adoption of the subscription-based business model in 2004, another print and TV ad campaign was launched in the cities in which the company had a sales presence...
Localized Content
WorldSpace India's growth was also attributed to the wide range of content that the company provided on its channels. Channels like "Farishta", Jhaankar (Hindi Film Music), Shruti, Ghandharv (Indian Classical Music), and KL Radio (Tamil), among others, not only entertained music lovers across the country but also Indians living abroad who received these channels through the AsiaStar satellite, whose footprint covered parts of Asia, Europe, and Africa. The television news channel NDTV India broadcast the audio component of both its English and Hindi news, along with other news providers like CNN International and BBC world. (Refer to Exhibit VII for channels broadcast via the AsiaStar and the AfriStar satellites)...
Competition
The greatest competition for WorldSpace India came from the private FM channels that had begun operating in India from 2000. A number of FM channels were launched in this period and they claimed to provide non-stop entertainment to listeners. The success of FM channels was also attributed to the rising number of cars in India. These channels targeted people traveling in cars and became a source of entertainment during travel. They were localized and catered to specific pockets in various regions across India and were usually broadcast in the regional language...
The Challenges for WorldSpace
WorldSpace Corp.'s total revenue in 2005 was $11.6 million of which $3.4 million (29%) came from WorldSpace India. The first two quarters of 2006 yielded revenues of $7.2 million worldwide. The net losses that WorldSpace had been posting since its initial launch fell substantially from $577 million in 2004 to about $80 million in 2005 (Refer to Exhibit VIII for WorldSpace Corp.'s Financials between 2004 and 2006). However, while the other two satellite radio service providers, XM and Sirius, made substantial ground in their areas of operation, WorldSpace, which was considered to be the pioneer in digital satellite radio, continued to suffer losses...
Exhibits
Exhibit I: WorldSpace's Old Logo
Exhibit II: A Note on Satellite Radio
Exhibit III: WorldSpace's Satellite Coverage
Exhibit IV: WorldSpace Corp. Subscription Base Over the Years
Exhibit V: WorldSpace Receivers
Exhibit VI: WorldSpace India's Subscription Rates
Exhibit VII: List of WorldSpace Channels
Exhibit VIII: WorldSpace Corp. Financials
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