By Jerry Cobb Reporter
CNBC
updated 12/8/2004 5:35:07 PM ET 2004-12-08T22:35:07

Now that he has satellite radio in his car, Los Angeles television producer Chuck Labella says he'll never listen to commercial radio again.

“I bought it because I'm a music fan,” he said. “And to listen to unedited music without disc jockeys, without commercials sounded like a dream to me."

For XM Satellite Radio and Sirius Satellite Radio, it's all-out war for customers like Labella. Some 4 million listeners have made the switch to satellite, and the battle has just begun.

"It's definitely very intensive competition,” said industry analyst David Kestenbaum at IRG Research. “It's a new business and they're both fighting to become the leader."

Boasting 2.5 million subscribers, XM Satellite Radio is the bigger of the two, with exclusive partnerships with General Motors and Honda, and exclusive content like raunch-talkers "Opie and Anthony" and Major League Baseball games.

"What we're looking for the end of this year is 3.1 million,” said Gary Parsons, chairman of XM Satellite Radio. “And what we've talked about in general is 20 million subscribers to XM by the year 2010."

Serious catch-up
Approaching 800,000 subscribers, Sirius Satellite Radio is playing an aggressive game of catch-up, partnering with Ford and Chrysler and signing exclusive deals with shock jock Howard Stern and the National Football League.

"Sirius will not stop with great programming,” said David Frear, Sirius Satellite's chief financial officer. “Radio is all about putting compelling content on the air. You want to make it relevant to listeners. It's what brings them to it."

Both companies have had a stellar year on Wall Street, though shares of Sirius have stumbled on concerns the stock is overvalued. Competition between the two is only going to increase with XM launching MyFy portable satellite radio. And Sirius is expected to make a similar announcement soon.

"There was actually a rumor in the marketplace ... that Sirius is going to sign up with Apple at the consumer electronics show in a couple weeks,” Kit Spring, an analyst at Stifel, Nicolaus & Co. a regional brokerage firm in St Louis. “Don't really know how credible that rumor is."

XM and Sirius are cooperating on developing a satellite radio receiver that's compatible with both services. But it will be years before that hits the market and in the meantime, this heated arch rivalry shows no sign of cooling off.

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