XM Seeks Less Noise, More Subscriptions

It launched with much hype and a hefty ad budget, but XM Satellite Radio now wants less hoopla and more sign-ups. That means whichever agency wins the subscription satellite-radio service’s review will be asked to create retail-focused ads to drive subscriptions, sources said.

XM launched a creative and media search earlier this month, following its decision late last year to end its relationship with TBWA\Chiat\Day, which helped launch the service in 2001. The client would not disclose billings, but its adspend dropped from $100 million in 2001 to just under $60 million last year, according to CMR.

TBWA\C\D’s work included ads that featured musical stars such as David Bowie, Snoop Dogg and B.B. King falling from the sky. It used the tagline, “Radio to the power of X.”

Client rep Chance Patterson said XM split with the shop because it is moving from its launch phase to an operational one. But sources said geography and money were the real issues—XM was frustrated by the distance from its Washington headquarters to the shop’s Playa del Rey, Calif., office and the cost of traveling between them. Sources said the agency offered to shift the account to its New York office several months ago but the client declined.

XM now seeks an East Coast shop, Patterson said. Sources added that the client wants a shop with at least $100 million in billings. Pile and Co., Boston, is leading the review.

Client decision makers include Gary Hahn, vp of creative services; Tricia Kesling, vp of marketing; and Steve Cook, evp of sales and marketing.

Hahn’s goal is to get quick results so XM can secure more financing, sources said. The client received its latest round, totaling $475 million, in January. The funds came too late for the company to stave off layoffs of 16 percent of its staff, but it is now expecting to break even by mid-2004. XM has more than 360,000 subscribers, and Patterson claimed it will have more than 1 million by year’s end.

In contrast, XM’s only other competitor, Sirius, has roughly 30,000 subscribers. Sirius, whose advertising is handled by Crispin Porter + Bogusky in Miami, spent $9 million on media in 2002, according to CMR.

“Neither Sirius nor XM has had an ad campaign that establishes the point of need and the solution,” said radio consultant Walter Sabo, president of Sabo Media, New York. He described a driver unable to find anything good on the radio, and said the solution is satellite radio’s 100 stations. “It seems to me the simplest concept to sell.”

While XM has the advantage of being first with the product, one source faulted the client for focusing too much on putting the service in new cars rather than getting dealers to sell XM to used-car buyers.

XM radios are installed or offered as options in 44 General Motors models, as well as in some Honda and Accord models, Patterson said. During fourth-quarter 2002, GM spent $10 million on TV spots from Campbell-Ewald, Warren, Mich., that featured XM, Patterson said. C-E will not pitch, sources said, because it is out of the client’s preferred geographic area and is too closely aligned with GM.

A decision is expected the second week in May. —with staff reports