Columnist: iPod will (Continue to) Beat Satellite Radio

MSN Moneyis Jon Markman has taken an interesting angle on the story of iPod dominance. We regularly hear about the next big iPod-killing music player (as one of our Observers recently pointed out), or about how competition in the music downloading business is going to get fierce. But Mr. Markman has asked a different question: can satellite radio derail the iPod? The two major players in that business are XM Radio and Sirius.

Mr. Markman answers with a resounding no. From the article:

For Apple, the coolness of the iPod costs little more than a year?s worth of industrial design and testing and a few bucks worth of satin-smooth metal, a handful of transistors per unit and some pixie dust. No big deal. Apple earns a return on capital of 5%. It?s not fantastic -- the computer industry overall earns 13.5% -- but it?s good enough.

For XM and Sirius, the coolness of their product costs hundreds of millions of dollarsi worth of broadcast licenses, satellite construction and launches, the development of vast programming bureaucracies from scratch in high-rent districts of New York and Washington, and breathtakingly expensive contracts to acquire exclusive content. XM and Sirius probably won?t be conventionally profitable in our lifetimes -- though, as the old saying goes, they hope to make it up in volume.

Elsewhere in the article, Mr. Markman drops this interesting comment: "Apple?s product is essentially a commodity, as any technology outfit with a business-development department can make a deal with recording companies to provide music online."

There is much more in the full article, which has a fair amount of information about the structure of the emergent satellite radio business model.