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XM Places $1 Billion Bet On Satellite Radio Launch

From a chair that looked as if it belongs on the starship Enterprise, Hugh Panero flipped a switch Tuesday and formally launched XM, the first of the nationwide satellite radio services to go on the air.

While the ceremony marked XM’s official start, it will not be a national service for some months because the signal is being beamed from the company’s two satellites – “Rock” and “Roll” – to San Diego and Dallas.

The company plans to roll out service to the southern half of the United States within a month and to the rest of the nation in November. But the ceremony, held in XM’s swank headquarters in a renovated building in an economically depressed area of northeast Washington, marks the beginning of what could revolutionize radio as we know it.

“What we are doing is launching a powerful new communications and entertainment medium,” Panero, XM’s president and CEO, told a crowd of employees, journalists and supporters. “We have music channels to soothe your mind and information to fill it.”

Panero and his backers are betting more than $1 billion that people will pay about $300 for a receiver and nearly $10 a month for 71 music channels and 29 news and talk channels delivered digitally, many uninterrupted by commercials. Panero compared the introduction of XM to other technological innovations in the information industries. XM’s launch is not unlike those of cable television or FM radio, he said.

“There has always been a unique relationship between technology, innovation and the distribution of music, news and information,” Panero said. “Remember 45s, remember vinyl record albums, remember the introduction of FM radio, the cassette, the Sony Walkman, the compact disc and cable TV with MTV? They all had dramatic impacts on music, bringing it to larger audiences in new and different ways. Remember when there were only three broadcast television networks? Soon people will say, ‘Remember when there was only AM and FM?’ And that leads us to XM Satellite Radio.”

While Panero is bullish on XM’s chances, he acknowledged that the launch comes at an uncertain time. The company originally scheduled its launch for Sept. 12, but like everything else in Washington, New York and nationwide, it was put on hold in the wake of the Sept. 11 terrorist attacks.

But the mood was upbeat at XM’s complex of 80 studios. People seemed relieved and ready to get the service up and running after nearly 40 months of preparation. Each of the DJs for the 71 music channels picked their first song, and many picked tunes with patriotic themes.

“Today, like the federal government, Congress and the stock market, business needs to get back to business, and that includes new businesses like ours,” Panero said. “U.S. business needs to grow, not shrink.”

But the terrorist attacks, coupled with the economic downturn and a soft advertising market, figure to make any new service a tougher sell.

“Obviously we’re concerned about what’s happened around us,” Panero said. “I think the service was a good idea before Sept. 11… but we’ll have to see where consumer confidence is.”

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