TMO Reports - Samsung & Napster, Not Apple, Partner With XM Satellite on MP3 Player/Radio

by , 3:00 AM EDT, July 27th, 2005

Korea's Samsung Electronics Co. Ltd. and not Apple Computer will be the first and possibly only company to form a strategic alliance with XM Satellite Radio to develop MP3 players that will also work as satellite radios, the companies jointly announced Tuesday. XM also announced a partnership that will let XM subscribers buy and download songs through an exclusive arrangement with the online music store Napster.

Under the terms of the accord, Samsung will begin selling by the end of 2005 two miniature flash memory players that will come with a kit allowing them to receive XM satellite radio stations. The solid-state flash memory is he same technology used in Apple's iPod shuffle.

The device XM is developing with Samsung will allow consumers to listen to live XM content when the device is plugged in to an XM-ready car stereo or to a home antenna. Consumers will be able to select songs they hear and purchase them via the new service to be called "XM+Napster." When they return it to a docking station connected to a computer, the device will download the music. Consumers also will be able to record live XM content, but they will not be able to transfer those songs to other devices or burn them onto compact discs.

XM officials did not announce pricing for the devices or the XM+Napster service.

Sean Butson, an analyst with Legg Mason Inc., called the XM's deal with Samsung "groundbreaking," in a research note published Tuesday. Mr. Buston wrote the deal with Samsung is "an important first step towards a mobile phone/satellite radio," being that the Korean electronics maker is also a leading cellular phone maker.

When asked if XM and Samsung are working toward mobile phones with satellite radio receivers, XM chief executive Hugh Panero told the Washington Post, "We're looking forward to having the relationship evolve into other devices."

Apple 'odd man out', for now

The announcement sees Apple shut out of any possibility in forming a partnership with the worlds largest radio satellite provider to create an all-in-one music/satellite radio device based on the best selling iPod music player and sell music via the iTunes Music Store (iTMS), at least for the foreseeable future. By XM going directly to the manufacturer of flash-based equipment -- much like it has done by having Delphi Electronics manufacturer is own XM-branded satellite receivers for auto and portable use, the need to form third-party partnerships with the likes of companies such as Apple are less of a necessity.

The only other remaining possibility for Apple is a partnership with XM competitor Sirius Satellite Radio. In late May, TMO reported Sirius CEO Mel Karmazin admitted he had talked with Apple about a Sirius-enabled iPod, but that no deal had been struck. Tuesday's announcement by XM, Samsung and Sirius could be a further catalyst for Sirius and Apple to form an alliance to compete with XM.