I wasn’t previously a believer, but I’m coming around to the viewpoint that Mel Karmazin is a BRILLIANT businessman.

Sirius launched after XM. Reception of its signal is problematic. The sound, to my ears, is clearly inferior to XM’s. Yet not only has Sirius stolen XM’s thunder, a betting man would say that it’s going to continue to steal market share from XM and quite possibly overtake the Washington, D.C. giant.

Oh, Hugh Panero, XM’s chief, was getting all the accolades in the past. For his brilliant strategy. Which was to partner with automobile companies. Installing XM-ready radios in a plethora of new cars and converting purchasers of these machines into fans. It’s really that simple. The conversion rate is astronomical. Satellite radio is like heroin. Given a free taste for a few months, people can’t RESIST continued payment, and enjoyment.

Sirius fucked up in this regard. Its auto partnerships were not as strong.

But those days are through. Since Mel has taken over, Sirius has strengthened its auto relationships to the point where they’re essentially equal to those of XM. And, rather than the dying GM, Sirius is partnered with brands like BMW and Mercedes-Benz. Watch MTV. Not everybody may be able to AFFORD one of these German cars, but they ASPIRE to them and know everything about them.

But Mel really started to shine in the area of programming.

Let’s be clear. Sirius was behind the 8 Ball. Without the Howard Stern deal, done before Mel joined the company, Sirius would have probably gone out of business. But, after that lifesaving move, after Mel got control of Sirius, he focused on PROGRAMMING! He added SPICE to a dead service. Now someone who listens to Sirius knows that the music playlists are tighter than a drumhead. But this ultimately makes NO difference. Because it’s almost impossible to A/B the two services. You buy one and stick with it. People buy Sirius for the sizzle, and STAY THERE!

XM’s music was LIGHT YEARS better than Sirius’. This was its main advantage. So what does Panero do? He fucks it up. Coming from the cable industry, where it’s all about DISTRIBUTION rather than content (that was Hugh’s end, the pipe, not the programs), Hugh took the programming reins from Lee Abrams and gave them to John Zellner and other Infinity hacks. Yes, hacks. These are the same people who fucked up terrestrial radio! And Zellner tightened playlists. Blinking, trying to be more like Sirius, without the PERSONALITIES, and ultimately more like terrestrial, which is a DEATH KNELL! The ineptitude of Mr. Panero here is staggering. Sure, John Malone made a lot of money, and the fact you might not know who he is proves the point, but although rich today, he’s been marginalized. Ultimately, satellite radio is about distribution AND content and Mr. Panero has steered his ship towards the rocks.

Believing that Sirius was overpaying for talent, not seeing the wisdom of Mr. Karmazin’s strategy, that you sell the sizzle, not the steak, Mr. Panero let Sirius get ALL the talent. And take NASCAR from XM too. Then, freaking out that they didn’t have Martha Stewart, never mind Jimmy Buffett, Eminem, Little Steven, et al, Mr. Panero OVERPAYS for Oprah Winfrey who will BARELY BE ON THE SERVICE! How boneheaded is THAT?

Then it comes down to the SR50. Sirius’ device that records.

Unlike XM, Sirius admitted right from the start that the SR50 is not a portable radio. You don’t carry it around like a transistor and listen. Rather, you record music while it’s in its dock and then carry it around like an iPod. The reason this is important is that XM’s originating product, the XM2Go, DIDN’T WORK! Oh, certain features work. But I know someone who purchased one to listen to baseball. Only one problem, you CAN’T! Not if you move the unit. You CONSTANTLY lose reception. To the point where he canceled his subscription.

XM just launched a product to compete with the SR50. The Pioneer Inno XM2Go. It records too. But unlike the SR50, XM maintains the Pioneer unit is portable.

Read Walter Mossberg in today’s "Wall Street Journal" A Portable Player For Both Satellite Radio, MP3s. Bottom line, the Inno doesn’t work. It’s just that simple. (And if you don’t know Mr. Mossberg’s power in the tech world, never mind on WALL STREET, please don’t make any tech decisions at your company.) As Mr. Mossberg says at the end of his review, "…its spotty reception, confusing software and monthly fee make the Inno a no-go, except for hard-core XM fans."

The Inno was supposed to be a BREAKTHROUGH! Not only allowing you to record and replay individual songs like the SR50, but giving you the ability to purchase said songs from Napster. Didn’t you see the endless announcements in the press?

Who were those announcements FOR? Hopefully not Wall Street. Any investor knows that Napster is a turkey of a stock. One whose carcass will probably get so lean it can’t even be served as a meal. The PUBLIC? As the cliche goes, they’ve been avoiding Napster in droves. Not only does it work in a less than stellar fashion, as Mr. Mossberg states, it DOESN’T GIVE THEM WHAT THEY WANT! OWNERSHIP!

So, you’ve got a device that doesn’t work giving almost nobody what they want. GREAT business decision.

But it gets worse. The RIAA is pissed. They don’t like this individual song/slice and dice recording/playback ability. To the point where they just SUED XM. Now THAT’S great publicity, THAT’S what you want. I mean the RIAA is a misguided lobby about as trustworthy as the organization Jack Abramoff ran which is pursuing legal strategies to a practical problem as its member record companies drive headlong towards extinction. But why the tussle? Why is XM making this stand? Why all the bad publicity, financial AND consumer, when almost NOBODY WANTS THE PRODUCT!!!

Talk about misguided. Who the fuck is RUNNING the XM ship?

This is where Mel Karmazin’s infinite wisdom comes in. He SETTLED with the major labels re the SR50. Not because he thinks they’re right, and under the present law it appears that the SR50 and XM’s Inno are completely legal, but because he knows the SR50 has a LIMITED MARKET! Why battle on an irrelevant front? Shit, Mel can see the BIG PICTURE! Not only does HE avoid bad publicity, Sirius shines when XM gets negative press. FURTHERMORE, Mel didn’t settle re FUTURE products. If they can ever get the technology on these devices to the point where they work and they’re actually usable and desirable to the average customer. Not that that ever will be. Because people don’t want their music locked to one device. And they don’t want to rent. Doesn’t the iTunes/Napster movie PROVE THIS?

Sirius has inferior hardware. On SO many levels Sirius is inferior. But XM keeps bungling the ball. Giving its smaller competitor openings, which Mel has driven Sirius right through.

Rumor has it that Lee Abrams is regaining his power at XM. One can only hope, DREAM, that this is true. Not only for business reasons, but for MUSIC reasons. For the first half-decade, XM was early FM on steroids. So good that you couldn’t stop talking about it. With such deep playlists, compiled by professionals, nuking any possibility of competition by Net radio and other amateur formats. You’d sit in your garage continuing to listen, just wanting to hear what they played next. The fact that Mr. Panero squandered this advantage is almost unfathomable.

Mel is old school. He’s about advertising. He’s about personalities. But really, it’s a new world out there. It’s about the ultimate content, not the branding. Panero should steer the ship away from the rocks. Stop chasing Sirius. And realize that HE’S got the killer product. Yes, XM should advertise/hype its MUSIC CHANNELS! THAT’S WHAT PEOPLE WANT!

It’s a word of mouth world. And that word is on steroids, being Net-enabled. Make something good, and everybody knows very quickly. Show people that MUSIC lives on XM, and people will flock to the service. Maybe slowly. But you’re building something, you’ve got to STAND for something. And now XM stands for almost nothing. Baseball and..? It’s so simple. Talk radio made inroads on terrestrial because music was so BAD! Cede talk to terrestrial. Don’t even try to compete with Howard Stern. Focus on MUSIC, which is the broadest swath, which is what most people want.