Nevertheless, I have little confidence in the long term prospects of satellite radio. I believe it won’t be long before we have widespread Internet access in cars. Your stereo and navigation system will be able to connect through your cell phone, using it’s Bluetooth connection (or with a built-in EVDO card). Then you’ll have access to all of Internet radio, which provides the same benefits as satellite radio. I think car computing will be getting really exciting over the next few years.

And sure, not all XM or Sirius subscribers listen in their cars, but I think it’s a big enough portion of their customer base that if they lost it, it would be game over. Maybe satellite radio stations will reinvent itself, but right now I can’t see how.

To carry the example a bit further, and also to bring it back on track with the topic of the post: iTunes has, far and away, the lion’s share of the download market. But there are other players (Napster, Amazon’s [relatively] recently launched service, et. al.), and it’s not inconceivable that there will be others. New players realize that if they’re even going to gain a foothold in an already crowded field, much less go on to be a force to be reckoned with, they’re going to have to innovate. When you take away what little competition is there, you lose some of the incentive for innovation.

And yes, it’s expensive to launch and maintain a satellite; but it’s not impossible. I could easily envision some kind of leased-access kind of thing via, say, the ESA. More likely, though, it’ll be one of the terrestrial giants (NewsCorp, anyone?) that will decide to expand their holdings into a new realm. I get the feeling that the closest analog we have right now is something like the early days of cable, though I wouldn’t bet the house on this playing out in the same way.

I briefly read in the business section that the merger was allowed because XM and Sirius successfully made the case that they don’t compete with each other - they compete with terrestrial radio, MP3 players, and CDs.

That rings true to me, at least anecdotally. Most of my friends don’t have satellite radio because they can hook up their MP3 player to their car stereo, or it’s a modern stereo that can play MP3 and WMA from CDs or DVDs. Personally, I don’t mind commercial radio because I get to hear new things, and I can change stations or hit the CD button if a commercial comes on.

On the flip side, my roommate just announced that he’s interested in buying one because he hates commercials and has no time to burn CDs or start a digital music collection. So for those reasons, it makes sense.

The big issue, as I see it, is that the infrastructure for these companies require networks of satellites. As an employee of a company that builds satellites and used to build/launch rockets, I can verify that launching satellites are OMFG crazy expensive. In light of that, the business model for satellite radio doesn’t seem too hot.

Which, on a related note, is the reason why my company does not build rockets any more. They spun that division off so it could merge with another company’s rocket division (also spun off). Now there’s one real rocket company because (since the tech bubble burst) the industry isn’t big enough to support multiple players. The gov’t agreed. I think the same could be said for satellite radio, but again, this is mostly conjecture on my part.